Inflation: Definition, Types, Causes & Effects

Lesson Transcript
Instructor: Brianna Whiting

Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.

Inflation is the rate at which the price levels of goods and services increase over time, thereby decreasing the rate of purchasing power. Learn about the definition and types of inflation, and explore its causes and effects. Updated: 10/14/2021

What Is Inflation

I am sure you have certain products you buy on a regular basis. Perhaps those products are your favorite snack or drink at the grocery store, such as a soda and a candy bar. Imagine, for the last year you have always been able to buy both items for only two dollars. However, one morning you swing into your local grocery store before work to grab your soda and snack and realize you do not have enough money. All of a sudden, the two dollars you have in your wallet is no longer enough to pay for your items. The new total is now $2.10. What you have just experienced is inflation.

You may be asking yourself, why do our favorite products keep increasing in price? Well, the answer to that question is inflation. Inflation is the rate of increase of the general level of prices for goods and services. In other words, it is the term used when the prices for goods and services increase over time. For example, if the inflation rate is 3%, then a $1 can of soda will cost $1.03 a year from now. When inflation occurs, money buys a smaller percentage of a good due to the increase in price.

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Inflationary Gap: Definition & Overview

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:01 What Is Inflation?
  • 1:05 Types of Inflation
  • 2:21 Effects
  • 3:08 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed Speed

Types of Inflation

Now that we know what inflation is, let's take a look at the different types and causes of inflation. While there are a few different types of inflation, we will focus on the two main types: demand-pull inflation and cost-push inflation.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it now
Create an account to start this course today
Used by over 30 million students worldwide
Create an account