Inflation
Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. When inflation occurs, each unit of currency buys fewer goods and services than before. It can happen due to factors like increased demand, higher production costs, or excessive money supply. Central banks monitor inflation closely, as moderate inflation is often seen as a sign of a growing economy, while high inflation can erode savings and lead to economic instability. Balancing inflation is key for sustainable economic growth.
Additional Insights
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Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. When inflation occurs, each unit of currency buys fewer goods and services than before. This can happen due to factors like increased demand, rising production costs, or expansion of the money supply. While a moderate level of inflation is normal in a growing economy, high inflation can erode savings and affect financial stability. Central banks, like the Federal Reserve, often adjust interest rates to help manage inflation and stabilize the economy.