Economics Economic Indicators Questions
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It erodes the purchasing power of money and reduces the value of each unit of currency. Inflation is measured using various economic indicators, including the Consumer Price Index (CPI), Producer Price Index (PPI), and the GDP deflator. The CPI measures changes in the prices of a basket of goods and services typically consumed by households, while the PPI tracks changes in the prices of goods and services at the producer or wholesale level. The GDP deflator, on the other hand, measures changes in the average price level of all goods and services produced in an economy. These indicators help economists and policymakers monitor and analyze inflation trends and make informed decisions.