What Does Deflation Actually Deflate?
Schectman, Joel, Picon, Michael, Newsweek
Byline: Joel Schectman and Michael Picon
Guess which one is the deflation price? (It's not always clear.)
It's complicated. Deflation and inflation are defined as cycles of falling and rising prices, respectively. Experts disagree on which force is more likely to overtake the economy, but either way, not every good or service will move in the same direction--creating confusing exceptions that make it hard to plan a family budget. To help make sense of it all, here are economists' predictions--for both scenarios--about prices in five everyday areas:
(up arrow, up arrow) Whether there is overall inflation or deflation, food is likely to cost more. Why? Americans buy their food in a global marketplace, and with demand intensifying in China and India, the cost of products like wheat could surge.
(up arrow) If prices for most goods in America go down, clothing will seem more expensive. That's because it's mostly made in the developing world, where demand--and prices--are rising.
(down arrow) If America experiences sharp inflation, clothing may seem cheaper than other products, because our cash would be worth more for foreign goods than domestic ones. …