Inflation refers to the rate at which the general price level of goods and services in an economy is increasing over time. In other words, inflation is the sustained increase in the prices of goods and services, resulting in a decline in the purchasing power of a currency.
Inflation occurs when the demand for goods and services exceeds their supply, leading to an increase in their prices. It can also occur when the supply of money increases faster than the supply of goods and services.
Inflation is typically measured using the Consumer Price Index (CPI), which measures the average change in prices of a basket of goods and services consumed by households over time. A high inflation rate can be harmful to an economy, as it reduces the value of money and erodes the purchasing power of consumers, leading to a decrease in consumer spending and economic growth.