What is 'Inflation'?

The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

Sharper Insight. Smarter Investing. Manage Preferences TERM OF THE DAY Inflation Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. Breaking it Down: As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs... Read More Related to "Inflation" Understand the Different Types of Inflation Inflation may seem like a straightforward concept, but it is more complex than it appears. We examine its varieties and causes. Read More How to profit from inflation While rising prices are bad news for consumers, inflation can be quite profitable for investors who seek out certain types of investments. Read More Inflation's Impact on Stock Returns The evidence is clear that value stocks perform better in periods of high inflation, and growth stocks perform better during periods of low inflation. Read More Related Definitions Inflation Accounting Inflation accounting is a special accounting technique used during periods of high inflation whereby statements are adjusted according to price indexes. Read More Purchasing Power Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Read More Real Interest Rate A real interest rate is one that has been adjusted for inflation, reflecting the real cost of funds to the borrower and the real yield to the lender. Read More Hyperinflation Hyperinflation is extremely rapid or out of control inflation. Read More You are currently subscribed as: mondemand.forex@blogger.com Unsubscribe  |  Manage Subscriptions Investopedia, LLC, A Division of IAC. 114 West 41st St, floor 8, New York NY 10036 Copyright © 2018, Investopedia, LLC. All Rights Reserved Follow Us: