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What do economists mean by "inflation"?

Question:

What do economists mean by "inflation?"

Inflation:

By inflation, the economists generally refer to the increase in the general price level of goods and services. It leads tp a loss of real value in the medium of exchange and unit of account within the economy.

Answer and Explanation:

Inflation refers to the increase in the general price level of goods and services over time. It simply means that one has to spend more to fill the petrol tank, buy a gallon of milk, or get a haircut, i.e it increases the cost of living and reduces the purchasing power of a currency.On the other hand, the inflation rate is the percentage increase in prices during a specified period, say a month or a year. Economists generally believe that very high rates of inflation or hyperinflation are caused due to an excessive growth of the money supply.


Learn more about this topic:

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What Is Inflation Rate? - Definition & Formula

from College Macroeconomics: Homework Help Resource

Chapter 4 / Lesson 16
105K

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