What is inflation?

Transcript

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Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, purchasing power is falling.

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Inflation happens when there is too much money in circulation.

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When people have more money, they tend to spend more, driving up demand for goods and services.

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As demand increases, suppliers begin to raise prices, leading to inflation.

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Inflation can be measured using the Consumer Price Index (CPI), which tracks changes in the prices of a basket of commonly bought goods and services.

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When inflation is high, the cost of living increases, and people's savings lose value.

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Central banks try to control inflation by managing interest rates and money supply.

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They aim for a desirable level of inflation that is not too high or too low, ensuring stability in the economy.