Let's learn about Inflation

Inflation is when money loses its value, or purchasing power, over time.

Inflation means that prices are increasing and money buys less goods.

You can see inflation when you notice that they price of an item has increased.

Inflation is measured by increases in average prices. The most commonlly used measures of inflation are the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).

Inflation can come from 2 sources:

1. Demand-Pull inflation

Demand-Pull inflation theory can be described as "too much money chasing too few goods." Typically there are more people willing to purchase items than can be produced so people bid prices up as they attempt to purchase them.

2. Cost-Push inflation

The Cost-Push inflation theory is where the cost of making goods increases, which are passed on in the form of higher prices.  These costs can include wages, taxes to be paid to the government or the cost of raw materials used to make the goods.