Quick Definition

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power over time.

Examples

• 1When the price of a gallon of milk increases from $3 to $3.30 over a year, this is a direct effect of inflation.
• 2During periods of high inflation, the cost of living increases, making it more expensive for consumers to buy the same goods and services.
• 3Inflation can lead to higher interest rates as central banks may increase rates to control economic overheating.
• 4Businesses often raise prices to keep up with increased costs of production due to inflation, affecting everything from groceries to electronics.

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