Inflation is a rise in the general price level of goods and services in an economy over a period of time. It is often measured by the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services typically purchased by households. Inflation can be caused by several factors, including an increase in demand for goods and services, an increase in the money supply, or an increase in costs of production. Inflation can have both positive and negative effects on an economy. It can lead to higher wages, which can boost consumer spending and economic growth. However, it can also lead to decreased purchasing power, making it more difficult for people to afford basic necessities. To control inflation, central banks use monetary policy tools, such as raising interest rates, to reduce the money supply and slow economic growth.
