What Is Inflation

Inflation is an increase in the average price of goods and services in an economy over time, resulting in a reduction in the purchasing power of money. This economic concept is a subclass of economic problems and is widely attributed to increases in the money supply, fluctuations in real demand for goods and services, changes in available supplies, significant decreases in interest rates set by the central bank, or changes in inflation expectations. Inflation is often discussed in relation to monetary policy and fiscal policy, as well as its impact on economic growth and unemployment. Inflation affects the purchasing power of money.