Inflation

Inflation is a persistent rise in the general price level. A one-time hike in the level of prices is not inflation. Only a sustained increase in the general price level is considered to be inflation.  Inflation is important to consider when discussing the stability of a country's economy.  Usually countries that experience highly-variable rates of inflation are not considered to have a stable economy.  In contast, deflation is a continuous fall in the average price level while disinflation is a decrease in the rate of inflation.

Contents

 

• Causes of Inflation
• Costs of Inflation
• Measuring Inflation
  • Calculating Inflation with Price Indexes
  • Producer Price Index
  • Consumer Price Index
  • GDP Deflator
    • Differences Between CPI and GDP Deflator
• The Phillips Curve
  • Rational Expectations
  • Adaptive Expectations
• Money and Inflation
  • Interest Rates
  • The Quantity Theory of Money
  • Types of Money
  • Functions of Money