In economics, inflation refers to a general progressive increase in prices of goods and services in an economy. 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.

What does inflation mean in simple terms?

Inflation is the decline of purchasing power of a given currency over time. ... The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.

What is inflation and example?

Inflation is an economic term that refers to an environment of generally rising prices of goods and services within a particular economy. As general prices rise, the purchasing power of consumers decreases. ... For example, prices for many consumer goods are double that of 20 years ago.