Political Economy Economic Systems 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 is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI). Inflation occurs when there is an excess of money supply in the economy relative to the available goods and services, leading to a decrease in the purchasing power of money. This means that the same amount of money can buy fewer goods and services compared to before. Inflation can be caused by various factors such as increased demand, rising production costs, changes in government policies, or fluctuations in exchange rates. It is important for governments and central banks to manage inflation to ensure price stability and maintain a healthy economy.