How does the economy typically respond to periods of inflation, recession, deflation, and depression?

During periods of inflation, prices rise, leading to a decrease in purchasing power and potentially slowing economic growth. In response, central banks may raise interest rates to curb inflation.

During a recession, economic activity slows down, leading to lower consumer spending and investment. Governments may implement stimulus measures to boost economic activity.

Deflation is a decrease in prices, which can lead to lower profits for businesses and reduced consumer spending. Central banks may lower interest rates to encourage borrowing and spending.

A depression is a severe and prolonged economic downturn characterized by high unemployment, low consumer confidence, and decreased investment. Governments may implement large-scale interventions to stimulate the economy and restore growth.