What does inflation mean in economics?

In economics, inflation refers to the general increase in prices of goods and services in an economy over time. This means that as inflation occurs, each unit of currency buys fewer goods or services, as the value of the currency decreases. Inflation is often measured by the Consumer Price Index (CPI) and is influenced by various factors, such as changes in the money supply, supply and demand imbalances, and government policies. High inflation can lead to negative effects on an economy, including reduced purchasing power for consumers, decreased investment, and higher interest rates.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

Similar Questions

Who benefits from inflation and who gets hurt by inflation?

Inflation can have both winners and losers. Those who benefit from inflation are borrowers, particularly those with fixed-rate loa...

What is the inflation target 2?

Inflation target 2, also known as “2% inflation target,” refers to a monetary policy framework in which a central bank...

Why is low inflation bad?

Low inflation can be bad for several reasons. Firstly, it can lead to a decrease in demand and economic growth, as consumers delay...

Ready to get started?

Download our app and start gaining insight into your current and future finances.