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State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate.

Inflation and deflation

A general increase in prices gives rise to inflation, while a fall in price amounts to deflation in an economy. With deflation, expenditure cannot equate to income at the present price level, paving the way for depression.

Expenditure and money multipliers

In a study by Sullivan, ‘expenditure multiplier occurs where one expense acts as another person’s income and is given by 1/ (1-MPC) while the money multiplier explains the extent to which formation of money by the banking sectors leads to growth in the supply of money consequently exceeding the growth in the monetary base’.

Balance of payments and budget deficit

Balance of payment deficit occurs where imports exceed exports while budget deficit shows an excess of expenses compared with income in the current and capital accounts. Budget deficits normally occur during the forecasting period.

Terms of trade and the exchange rate

Terms of trade are the relationship between prices of exports and prices of imports, while exchange rates compare currencies between two countries (relativity) such that appreciating currency would result in more imports and fewer exports.

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Academic.Tips. (2021) 'State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate'. 23 July.

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Academic.Tips. (2021, July 23). State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate. https://academic.tips/question/state-the-difference-between-inflation-and-deflation-between-the-expenditure-multiplier-and-the-money-multiplier-between-the-balance-of-payments-deficit-and-the-budget-deficit-between-the-terms-o/

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Academic.Tips. 2021. "State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate." July 23, 2021. https://academic.tips/question/state-the-difference-between-inflation-and-deflation-between-the-expenditure-multiplier-and-the-money-multiplier-between-the-balance-of-payments-deficit-and-the-budget-deficit-between-the-terms-o/.

1. Academic.Tips. "State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate." July 23, 2021. https://academic.tips/question/state-the-difference-between-inflation-and-deflation-between-the-expenditure-multiplier-and-the-money-multiplier-between-the-balance-of-payments-deficit-and-the-budget-deficit-between-the-terms-o/.


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Academic.Tips. "State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate." July 23, 2021. https://academic.tips/question/state-the-difference-between-inflation-and-deflation-between-the-expenditure-multiplier-and-the-money-multiplier-between-the-balance-of-payments-deficit-and-the-budget-deficit-between-the-terms-o/.

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"State the difference: between inflation and deflation; between the expenditure multiplier and the money multiplier; between the balance of payments deficit and the budget deficit; between the terms of trade and the exchange rate." Academic.Tips, 23 July 2021, academic.tips/question/state-the-difference-between-inflation-and-deflation-between-the-expenditure-multiplier-and-the-money-multiplier-between-the-balance-of-payments-deficit-and-the-budget-deficit-between-the-terms-o/.

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