Inflation and Monetary Policy

Inflation and Monetary Policy

Introduction

Inflation, in economics, is the general rise in prices of goods and services relative to a currency over a period of time. With the rise in the general price level, each unit of money will buy relatively fewer goods and services. This means that inflation reflects the decreased purchasing power of money: a loss of real value of the internal medium of exchange and unit of measure of an economy. A common measure of inflation is the price index, which corresponds to annualized rate of general price variation over time (the most common of them ...