Infltion and Deflation ( i can't copy diagrams because i've mac )

Infation : defined as a general increase in the price level over a period of time. For more tight people, Inflation - when the prices go up.
Cost - push inflation is caused an increase firms costs due to rising input prices ( wages, raw materials, energy, etc..)
Demand - push inflation is caused by a lot of demand chasing too few goods and services.
 One clever and educational humen said that : Inflation is one of the "evils" in macroeconomics. In fact, price level stability is one of the three main goals of macroeconimics policy. Inflation's effects iclude
* Loss of purchasing power - all prices rise and no income, in real terms people becoming poorer. "real income" is nominal income minus inflation.
* Loss of savings. Savers are negativly effected to inflation.If you put $1000
in the bank at 5% interest today, but there is inflation of 10% in the next year,
then you will have actually lost 5% of your savings. The real interest rate is the
nominal interest rate minus the rate of inflation.
* Higher interest rates for borrowers: In times of high inflation, banks will
raise the interest rates they charge borrowers. A lender charging 4% interest
when there is inflation of 6% will actually be paid back in money worth 6% less
than the money originally lent. To maintain profits, banks must charge a
higher nominal interest rate than the rate of inflation, making it more costly
for firmst and households to borrow financial capital
* Effect on international competitiveness: High inflation at home makes
domestic output less attractive to foreigners, and imports more attractive to
domestic consumers. This could move a country's trade balance towards
deficit.

  Deflation
When the prices go down is sound good, people who don't know about deflation become fools!

*Unemployment: Low demand for goods and services means firms must lay off workers.
*Delayed consumption: With the expectation of future price decreases,households will increase savings and decrease spending. This could lead to a deflationary spiral.
*Declining investment: If firms expect less demand for their output in the future, they'll invest less now, which could result in slower economic growth.
*Cost to borrowers: The real debt burden of borrowers increases as the price level falls. Bankruptcies result as borrower's incomes fall while the value of
the money they must pay back increases.