Inflation refers to the general increase in the price level of goods and services over time. In other words, it is the rate at which the general level of prices for goods and services is rising, resulting in a decrease in the purchasing power of a currency. Inflation is typically measured as the percentage change in the Consumer Price Index (CPI) or another similar price index over a period of time.
Inflation can be caused by a variety of factors, including an increase in the demand for goods and services, a decrease in the supply of goods and services, or an increase in the cost of production. In some cases, inflation can be driven by external factors such as changes in global commodity prices or exchange rates.
Inflation can have both positive and negative effects on an economy. Moderate inflation can be a sign of a healthy and growing economy, while high inflation can lead to economic instability and decreased purchasing power for individuals and businesses. Central banks and governments typically use monetary and fiscal policies to try to manage inflation and maintain price stability.
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