Inflation: Background, Causes and Current Policies

Inflation is defined as a general increase in the price of goods and services across the economy, or, in other words, a general decrease in the value of money. As inflation occurs, individuals can purchase fewer goods and services with the same amount of money. Measures of inflation are used to adjust monetary figures to keep purchasing power constant over time, allowing for more accurate comparisons across disparate time periods. In general, inflation can be costly to the economy because it tends to interfere with pricing mechanisms in the economy, resulting in individuals and businesses making suboptimal spending, saving, and investment decisions. This book begins by explaining what inflation is and how it is measured. It then discusses the costs of inflation Finally, the book analyzes the causes and implications of the current situation.