Compare and contrast inflation and recession How do inflatio

Compare and contrast inflation and recession. How do inflation and recession influence your financial decisions?

Solution

During inflation, prices in the economy rise and the currency loses its value very rapidly.

Whereas, in case of recession, economic activities slow down and inflation in recession period comes down.

Speaking of financial decisions, people tend to save more in the times of inflation and tend to spend more during recession. The reason being, interest rates are kept high during inflation and low during recession. These rates are determined by the central bank of the nation.