Why does inflation decrease but prices continue to go up?

This is a good question and it refers to the difference between deflation and disinflation. Sometimes if inflation is at 2% and it decreases to 1.5% for example, there will still continue to be a general price level  increase of 1.5% over the next month, but the rate of increase in prices has slowed down.

Disinflation is this slow down in the increase in prices but the prices do still increase. What you're thinking of is deflation which means that inflation is negative and the price level is decreasing. Deflation is quite rare in economics but disinflation happens all the time due to slowing of the increase in the price level.

LB

Related Economics A Level answers

All answers ▸

If John’s elasticity of demand for burgers is constantly 0.9, and he buys 4 burgers when the price is £1.50 per burger, how many will he buy when the price is £1.00 per burger


What is an economic recovery and how is it related to unemployment?


Please outline the fundamental Kalam and evaluate its weaknesses


Why is the demand for a Ford Car more 'elastic' than the demand for petrol?