Inflation
noun · Economics
Definition
A sustained rise in the general level of prices.
Explanation
It reduces the purchasing power of money. It is usually measured by changes in a price index.
Example
If the price index rises 5% over a year, inflation is 5%.
Common confusion
When inflation falls, prices are still rising, only more slowly.
Related terms
- Consumer price indexA measure of the average change in prices of a basket of goods and services bought by households.
- Interest rateThe price of borrowing money, or the return on saving it, expressed as a percentage.
Study guides that use this term
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