Inflation—Deflation
Direct Exchange - Shoe Production Decreases

Shoe Production Decreases

Shoe Production Decrease -2.00%/Month
Wheat Production Increase 0.00%/Month

What happens when the production of shoes declines?

Inflation-Deflation

In this case shoe production decreases by 2% each month (previous month's production times -2%), causing the price of shoes, in units of wheat, to increase each month. This time it means that it will require more and more bushels of wheat to buy one pair of shoes (the red line).

At the same time the price of wheat in units of shoes decreases. In other words, it will require fewer and fewer pairs of shoes to buy each bushel of wheat (the blue line).

Similar to the two previous examples exchange ratios remain reciprocal throughout the 60 month period.