- 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