Measures the increase of prices for goods and services in an economy over a period of time
Impact customers' purchasing power, less disposable income to maintain their lifestyle, reduce savings for retirement
Is tracked with consumer price index (CPI), producer price index (PPI), personal consumption expenditures price index (PCE), and the wholesale price index (WPI)
Deflation
When prices decrease in an economy, which increase the purchasing power
This impacts people who have loans because the money used to pay back might be worth more than the loan - leading to halt in spending
Demand pull inflation
High consumer demand for a product pulls the prices to rise
Cost pull inflation
Raw material, labour increases the price of the product
Built-in inflation
Consumer expectations that inflation will continue in the future causes the price to increase
If it is managed, it can be beneficial to the economy but if left unmanaged it can be impossible to recover from