Confusing Banking Terms Explained

Dear Aspirants, Hope your exam preparation is in full-swing. We are not walking encyclopedia nor do we expect you to know everything about anything. But this should not, at any point of time, create hindrance in your performance. While attempting questions in exams like IBPS PO, IBPS RRB, NIACL, or even SSC, UPSC, we often come across terms or concepts that we are not aware of or we don’t know how to differentiate between them because they sound or appear almost same. The situation becomes nerve-racking which negatively affects our performance in the short term and inhibits our success in the long run. To help you stay away from situations like this, we always try to keep you updated and abreast with things that might come in exams. Today, in this blog we have compiled few Confusing Banking Terms that you often find hard to differentiate. So, let’s get started!


Confusing Banking Terms


Inflation is the persistent increase in the price of all goods and services over a period of time. It creates instability and disequilibrium in the economic world. The situation affects mostly the poor and vulnerable section of society because the price hike makes it difficult to afford even basic needs.


Stagnation refers to the stage when there is little or no growth in an economy for a prolonged period. It is usually marked by high unemployment.


As understood by the word itself that it is a combination of two words: Inflation + Stagnation.

Stagflation, thus, describes a situation when the inflation rate is high, accompanied by slow economic growth and steadily high rate of unemployment.

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Deflation refers to the situation where the value of money increases and the price of goods and services falls down so that inflation rate becomes negative. It occurs when the inflation rate falls below 0%, i.e., it is just the opposite of inflation. While deflation increases the value of currency over time, inflation, on the other hand, reduces it.


Disinflation refers to the decrease in the rate of inflation over the short term.

Disinflation differs from Deflation as in deflation there is a negative inflation rate, while in disinflation, the inflate rate declines but still remains positive.


Reflation, the term often mixed with inflation, refers to the period of economic recovery after a period of contraction. In the words of G.D.H. Cole,

“reflation may be defined as inflation deliberately undertaken to relieve a depression.”
It can also be referred to as ‘controlled inflation’ because here the price rise is gradual while during inflation, it is at a faster pace.

Banking and Government Exam : Banking Awareness Quiz


Recession refers to the period of slackness when economic activities slows. A significant fall in spending usually leads to recession.

Example: The Great Recession of 2008


Depression occurs when there is a prolonged period of economic recession. It is marked by a significant decline in both income and employment. 

Example: The Great Depression of 1929

This is all from us in this blog. Hope you find the information useful. Let us know if you have any doubt regarding this in the comment section below.

Note: We’ll discuss Inflation in detail in our subsequent blogs. Till then Keep visiting the page for more updates and prepare well.

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