The answer is both. Let's look at how inflation impacts economic growth. The intuition goes like this: when the unemployment rate is high, there are lots of workers available for any employer that wants to hire them. As a result, employers don't need to compete for workers by paying higher wages. But, if the unemployment rate is low, companies must pay more to attract employees, driving up wages. Higher wages in turn means more money coursing through the economy, chasing finite goods and services, which creates inflation. This certainly is a simplified way at looking at inflation, and there are a lot of factors that affect inflation that are unrelated to the domestic job market. Regardless, high inflation can be dangerous. Many countries have struggled with high inflation - and in some cases hyperinflation, which is defined as 1,000% or higher inflation a year. In 2008, Zimbabwe experienced one of the worst cases of hyperinflation ever, which led to the country giving up its national currency. Venezuela is a current example of a country experiencing high inflation. However, if rising prices can have negative consequences, falling prices can as well. Negative inflation - or deflation - means the purchasing power of a currency rises over time. When prices are falling, consumers delay making purchases if they can, anticipating lower prices in the future. This means less economic activity, less income generated and lower economic growth. Japan is one country with a long period of little to no economic growth, largely because of deflation.