EconGuru Economics Guide » Inflation

Inflation

Inflation occurs when overall price level rises from one period to the next. The rate of inflation expresses the increase in percentage terms.

Inflation is persistent and inevitable in all economies, especially those growing rapidly with a high employment rate. So it is usually associated with favorable economic performance. The opposite of inflation is deflation, which is a dynamic process of generally declining prices.

Hyperinflation is a very sharp inflation with a rate of more than 100% per month, causing 100 dollars to worth only 50 dollars of goods and services in the previous month.

An economy suffers from stagflation when it's stuck in GDP growth with a relatively high inflation rate.

Primary reason accounts for inflation is the steady growth in supply of money by monetary authority such as a central bank.