Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time. It is measured as the percentage change in the price index, which is a statistical measure of the average price of a basket of goods and services representing the typical consumption of households in an economy. Inflation occurs when the overall level of prices in an economy rises, and it is typically expressed as an annual percentage rate.
Inflation has a number of economic and social impacts. On the one hand, it can have positive effects, such as encouraging people to spend and invest their money more quickly, which can boost economic growth and employment. On the other hand, inflation can also have negative effects, such as reducing the purchasing power of money and eroding the real value of savings and investments. Inflation can also create uncertainty and instability, which can discourage people from making long-term plans and investments.
There are several factors that can cause inflation, including increases in the money supply, increases in production costs, and increases in demand. Inflation can also be influenced by factors such as changes in government policies, global economic conditions, and natural disasters.
In most countries, central banks and governments try to maintain low and stable levels of inflation through a variety of monetary and fiscal policies. These policies can include setting interest rates, regulating the money supply, and adjusting government spending and taxation. By controlling inflation, central banks and governments can help to maintain