What Is Inflation? Meaning & Example
Definition
Inflation is the general rise in prices across an economy over time, which reduces what each unit of money can buy. Moderate inflation is normal, while high inflation erodes savings quickly.
Related terms
The Consumer Price Index tracks the average change in prices paid by consumers for a basket of goods and services. It is one of the most watched measures of inflation.
Purchasing PowerPurchasing power is the amount of goods and services a unit of money can buy. Inflation reduces purchasing power over time.
Interest RateAn interest rate is the cost of borrowing money or the reward for saving it, shown as a yearly percentage. Central bank rate decisions influence rates throughout the economy.
What is Inflation?
Inflation is the general rise in prices across an economy over time, which reduces what each unit of money can buy. Moderate inflation is normal, while high inflation erodes savings quickly.
Can you give an example of Inflation?
If inflation runs at 3% a year, a $100 grocery basket would cost about $103 a year later.