The useful idea
- Prices rise
In economics, inflation is an increase in the average price of goods and services in terms of money.
- Money buys less
When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.
- Measured by an index
The common measure of inflation is the inflation rate, the annualized percentage change in a general price index.
Why this matters
Use Inflation to compare the trade-offs before committing money.
Try this
Use Inflation to compare the trade-offs before committing money.
Test your recall
Which idea belongs to the explanation of Inflation?
- Prices rise — correct
- Money buys less
- Measured by an index
In economics, inflation is an increase in the average price of goods and services in terms of money.
General education only — not personal financial advice.