While watching the evening news, a
familiar phrase “prices will go up” may often be heard whenever
goods in the market are being reported. But in general, once the
prices goes up, it means that there is an impending Inflation.
Inflation is the rate at which the
general level of prices for goods and services are increasing, and
thus the purchasing power of a currency is decreasing. Moreover,
price inflation is measured through the inflation rate. Inflation
rate is the annualized percentage change in a general price index
(usually Consumer Price Index) over time.
The inflation rate and purchasing power
are always like on a seesaw. If the inflation rate is down, the
purchasing power is up and vice versa. Normally, central banks will
make some movements to prevent or halt a severe inflation. Most
central banks maintain an inflation rate of 2-3%
Inflation is one of the main indicators
on how does an economy fare.
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