Inflation
Inflation is the general increase in the level of prices of goods and services in the long term. When inflation occurs, the purchasing power of each dollar decreases.
The reasons of inflation are debatable, but the consensus view is that inflation is caused by the money supply growing faster than the economy.
Inflation appears inevitable in a fiat-money system, as there are no real restrictions on the issuance of money. Central banks attempt to control the rate of inflation by controlling the money supply via setting interest rates, open market operations etc etc.
The Consumer Price Index is one of the best known indicators of inflation.
Related Terms
- Headline Inflation
- Core Inflation
- Treasury Inflation Protected Securities – TIPS
- Misery Index
- Real Rate of Return
- Cash Equivalents
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