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 ▸

Explain how a firm's costs of production are affected by the law of diminishing marginal returns in the short run (10)


What is a market equilibrium? Describe and explain an equilibrium graphically


Can firms in a perfectly competitive market make supernormal profits?


Is the demand for food likely to be Price elastic or Inelastic?