Inflation

Inflation is a sustained increase in the general price level of goods and services, reducing the purchasing power of money over time.

Aggregate demand: Total planned spending on goods and services in an economy at different price levels. When spending grows faster than productive capacity, sellers can raise prices.
Price level: A measure of the average prices of goods and services in an economy. Inflation tracks changes in this aggregate, not every individual price.
Deflation: A sustained decline in the general price level. It reverses inflation’s broad effect on the purchasing power of money.
Inflation targeting: A monetary policy framework in which a central bank publicly aims for a specified inflation rate. It makes price stability an explicit, measurable policy objective.
Weimar hyperinflation: The extreme inflation in Germany during the early 1920s, culminating in the collapse of the mark’s value. It illustrates how fiscal and monetary breakdown can destroy confidence in money.
Cost-push inflation: Inflation driven by rising production costs, such as wages, energy, or materials. Higher input costs can pass through to consumer prices.
Consumer price index: An index measuring the prices of a representative basket of household goods and services. It is a common way to estimate inflation faced by consumers.
Disinflation: A decline in the rate of inflation while the general price level continues to rise. It distinguishes slowing inflation from falling prices.
Monetary policy: Central-bank actions that influence interest rates, credit conditions, and money supply. Central banks adjust policy to influence inflation and economic activity.
1970s stagflation: The period of high inflation and weak growth experienced by several advanced economies in the 1970s. Oil shocks and persistent price pressures challenged familiar policy assumptions.

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