Inflation
Inflation By JAMES CHEN What Is Inflation? Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time. It is the rise in the general level of prices where a unit of currency effectively buys less than it did in prior periods. Often expressed as a percentage, inflation thus indicates a decrease in the purchasing power of a nation’s currency. Inflation can be contrasted with deflation, which occurs when prices instead decline. KEY TAKEAWAYS Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Inflation is classified into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation. Most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Inflation can be viewed positively or negatively depending on ...