The inflation rate is a measure of how quickly prices rise. It’s based on the prices of a “basket” of goods and services that represent what people actually buy in an economy (and includes things like bread, a bus ticket, and a holiday). The prices of the items in the basket are regularly surveyed at many points of sale. The results are then compared to the prices of the same basket at different times, which lets economists know how fast prices are rising. The basket is also updated at regular intervals to account for changes in what people are buying, new products, and the disappearance of old ones. The rate is usually reported as a percentage. It’s also sometimes reported as the core inflation rate, which excludes more volatile items like food and energy.
A little bit of inflation can be a good thing, as it means that your money keeps growing in value and you can get more out of it. But if inflation is too high, that can be problematic for everyone, especially those on fixed incomes, as their purchasing power decreases over time.
Inflation is a phenomenon that’s been around for millennia. It’s caused by a variety of factors, including excess demand for goods and services, government spending, shortages in certain markets, and even wars. It can happen locally or globally, and can have effects on both tradable and non-tradable goods. Inflation can also be affected by the currency that’s being used, with a depreciating currency causing prices to fall.
About the Author
