Disinflation & Deflation

Deflation is negative inflation rate whereas Disinflation is positive inflation rate but slow compared to previous period.
Let’s assume your cycle wheel rotation rate is inflation rate. Wheel is moving at 10 rotation per minute, in 1st minute. In 2nd minute it is moving at 20 rotation per minute.
Inflation rate = 20 rpm – 10 rpm / 10 rpm * 100 = 100% inflation.

Now in 3rd minute wheel rotation is 25 rotation per minute.
Inflation rate = 25 rpm – 20 rpm / 20 rpm * 100 = 25% inflation.

This 100% to 25% drop is our disinflation. Inflation is positive but rate is slow.

In 4th minute wheel rotation is 20 rotation per minute.
Inflation rate = 20 rpm – 25 rpm / 25 rpm * 100 = -20% inflation.
This negative rate of inflation is our Deflation.

What is Deflation and Disinflation in real economy ?
First we pick up any govt. index say CPI or WPI.
We compare point-to-point two value of index. Say index value of june 15 and june 14.
Then we calculate the inflation rate: june 15 – june 14 / june 14 * 100

Deflation is not good. It means prices are sinking. When price sink, remuneration to producers or FoP decrease. Widespread unemployment. Demand almost disappears.
But at same time in deflation, money value increase. What you were getting in more price during inflation, can be available for less during deflation.

It is similar to deflation, as money supply decrease in both, but disinflation is not bad. Rather government goes for disinflation to tackle inflation. Disinflation saves our poor people from too much inflation. Disinflation also brings back glory of the currency, as it start looking piece of paper, when there is too much inflation.
Disinflation is till inflation rate remains positive, that means still there is remuneration for producers. In deflation prices can fall, even below the base year price, there is no limit.

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