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THE WEALTH OF NATIONS: Officially titled An Inquiry into the Nature and Causes of the Wealth of Nations, this book written by Adam Smith and published in 1776, is considered to be the foundation for the modern study of economics. The Wealth of Nations was the first to combine assorted economic discourse and analyses into a single book. One of its most important themes is the efficiency of free trade and market exchanges unrestricted by government that leads to macroeconomic full employment and microeconomic efficiency.

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DISINFLATION:

A decline in the inflation rate. With disinflation, prices continue rising, just not as fast. Numerically speaking, disinflation occurs if the inflation rate over three consecutive years is 10 percent, 6 percent this year, and 4 percent. Disinflation, a reduction in the inflation rate, is not the same as deflation, which is an actual decline in the price level. Should disinflation continue, presumably due to anti-inflationary monetary or fiscal policies, then the average price level might eventually decline, making the transition from disinflation to deflation.
Inflation Rate
Inflation Rate
Disinflation generally comes into popular use when inflation has been relatively high and troublesome for a period of time and people are looking for any sign of relief. As such, a decrease in the inflation rate is taken as good news. However, disinflation is actually a relatively common phenomenon associated with business cycles. As this chart of inflation rates over the past few decades illustrates, inflation invariably declines during business-cycle contractions (shaded areas).

During the contraction of the early 1990s, disinflation brought the inflation rate down from about 6 percent to just over 2 percent. An even more dramatic example of disinflation resulted from the contraction of the early 1980s. The inflation rate declined from over 14 percent to under 4 percent. In fact, this particular contraction was created with contractionary monetary policy by the Federal Reserve System with the expressed goal of reducing the high inflation rates that characterized the 1970s, that is, to achieve disinflation.

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DISINFLATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: May 8, 2021].


Check Out These Related Terms...

     | price level | price index | inflation | deflation | cost of living | inflation problems | inflation causes | inflation rate | Consumer Price Index | GDP price deflator |


Or For A Little Background...

     | business cycles | expansion | macroeconomics | macroeconomic goals | macroeconomic problems | production possibilities | gross domestic product | real gross domestic product | nominal gross domestic product |


And For Further Study...

     | demand-pull inflation | cost-push inflation | Producer Price Index | Wholesale Price Index | CPI and GDP price deflator | unemployment | Bureau of Labor Statistics | Bureau of Economic Analysis | National Income and Product Accounts | shortage | circular flow | stabilization policies | production cost |


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