Glossary

Inflation is the gradual increase in the general price level of goods and services in an economy over time. It is often measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI).

When inflation occurs, each unit of currency buys fewer goods and services, reducing the purchasing power of money. Moderate inflation is considered normal in a healthy economy, but high inflation or deflation (a decrease in the price level) can cause economic problems. 💸

For example, if the inflation rate is 2%, a loaf of bread that costs $1 today might cost $1.02 next year.

Fun fact: In the early 1920s, Germany experienced a period of hyperinflation, which saw the price level increase at an extremely rapid rate. At its peak, prices doubled every 3.7 days, and the exchange rate reached 4.2 trillion German marks to 1 US dollar. This period is often cited as an example of the dangers of unchecked inflation. 🇩🇪💰💨