What is Inflation?

The opposite of deflation, inflation is the increasing price of goods and services in an economy that is often caused by a increase in the money supply. Inflation is generally measured by the Consumer Price Index and the Producer Price Index. Because of inflation, the value and purchasing power of a dollar decreases over time. While the annual rate of inflation has fluctuated greatly over the last half century, ranging from nearly 0% – 23% inflation, the Federal Reserve Bank (aka “the Fed”) actively tries to maintain a specific rate of inflation, which is usually 2-3%.


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