# Reflation > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Reflation > Markdown URL: https://mediated.wiki/source/Reflation.md > Source: https://en.wikipedia.org/wiki/Reflation > Source revision: 1308141815 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) Term in economics **Reflation** is used to describe a return of prices to a previous rate of inflation. One usage describes an act of [stimulating](/source/Economic_stimulus) the [economy](/source/Economy) by increasing the [money supply](/source/Money_supply) or by reducing [taxes](/source/Taxes), seeking to bring the economy (specifically the price level) back *up* to the long-term trend, following a dip in the [business cycle](/source/Business_cycle). It is the opposite of [disinflation](/source/Disinflation), which seeks to return the economy back *down* to the long-term trend.[1][2] ## Overview In this perspective, reflation, is contrasted with inflation (narrowly speaking) *above* the some long-term trend line, while reflation is a recovery of the price level when it has fallen *below* the trend line.[3][4] For example, if inflation had been running at a 3% rate, but for one year it falls to 0%, the following year would need 6% inflation (actually 6.09% due to compounding) to catch back up to the long-term trend. This higher than normal inflation is considered reflation, since it is a return to trend, not exceeding the long-term trend. This distinction is predicated on a theory that [economic growth](/source/Economic_growth), where there is long-term growth in the economy and price level, is both sustainable and desirable. Just as [disinflation](/source/Disinflation) is considered an acceptable antidote to high inflation, reflation is considered to be an antidote to [deflation](/source/Deflation) (which, unlike inflation, is considered bad regardless of its magnitude). Reflation has also found usage in forensic economics to describe a return to monopolistic (exorbitant) price paths following correction. Inflation can be regarded as expansion of prices beyond previous levels, while reflation can describe return to a previous pricing strategy. ## Policy Further information: [Economic stimulus](/source/Economic_stimulus) The term "reflation" can also refer to an [economic policy](/source/Economic_policy) whereby a government uses fiscal or monetary stimulus in order to expand a country's output. This can possibly be achieved by methods that include reducing tax, changing the money supply, or even adjusting [interest rates](/source/Interest_rate).[5] Originally, it was used to describe a recovery of price to a previous desirable level after a fall caused by a recession. Today it also (in addition to the above) describes the first phase in the recovery of an economy which is beginning to experience increasing prices at the end of a slump. With rising prices, employment, output and income also increase till the economy reaches the level of [full employment](/source/Full_employment).[6] ## See also - [Economic bubble](/source/Economic_bubble) - [Inflationism](/source/Inflationism) ## References 1. **[^](#cite_ref-1)** ["Report: Reflation Risk"](https://web.archive.org/web/20210608114936/https://www.goldmansachs.com/insights/pages/reflation-risk.html). [Goldman Sachs](/source/Goldman_Sachs). 7 April 2021. Archived from [the original](https://www.goldmansachs.com/insights/pages/reflation-risk.html) on 8 June 2021. Retrieved 8 June 2021. 1. **[^](#cite_ref-MBN_2-0)** ["What is reflation? Definition and meaning"](https://web.archive.org/web/20210608114933/https://marketbusinessnews.com/financial-glossary/reflation-definition-meaning/). *Market Business News*. Archived from [the original](https://marketbusinessnews.com/financial-glossary/reflation-definition-meaning/) on 8 June 2021. Retrieved 8 June 2021. 1. **[^](#cite_ref-3)** ["Position for reflation"](https://www.ubs.com/global/en/wealth-management/chief-investment-office/investment-opportunities/key-investment-ideas/2021/position-for-reflation.html). [UBS](/source/UBS). Retrieved 8 June 2021. 1. **[^](#cite_ref-SMH_4-0)** Parkes, Graham (2021-02-23). ["What is a 'reflation trade' and why is it important to investing?"](https://www.smh.com.au/money/investing/what-is-a-reflation-trade-and-why-is-it-important-to-investing-20210223-p57543.html). *[The Sydney Morning Herald](/source/The_Sydney_Morning_Herald)*. Retrieved 8 June 2021. 1. **[^](#cite_ref-5)** ["Global Reflation Continues"](https://www.morganstanley.com/im/publication/insights/investment-insights/ii_globalreflationcontinues_us.pdf) (PDF). [Morgan Stanley](/source/Morgan_Stanley). March 2017. Retrieved 8 June 2021. 1. **[^](#cite_ref-6)** Baker, Jonathan (14 January 2021). ["The Reflation Trade: What Is It?"](https://www.bdfllc.com/knowledge-center/wealth-watch-newsletter/the-reflation-trade-what-is-it/). BDF LLC (BDF). Retrieved 8 June 2021. ## External links - [Dalio, Ray](/source/Ray_Dalio) (September 22, 2013). ["How The Economic Machine Works"](https://www.youtube.com/watch?v=PHe0bXAIuk0). 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