Inflation

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly. The major causes of inflation include demand-pull inflation, cost-push inflation, and built-in inflation. It is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI). High inflation can harm an economy, increasing uncertainty and discouraging savings and investment.