- What inflation is and how it is measured
- How prices are determined by demand and supply
- How inflation can be caused by higher spending or rising costs
- Why both inflation and deflation can be bad for an economy
- The extremes of deflation and hyperinflation
- Why inflation expectations are important
WHAT IS INFLATION?
Pick up almost any economics textbook and you will find this definition of inflation: it is a rise in the general level of prices in an economy sustained over time. There are two words that are particularly important here – general and sustained. We use the word general to get across that we are not talking about ...