What is Inflation

Inflation refers to the rate at which the prices of goods and services rise over a period of time, leading to a reduction in the purchasing power of money.

Features of Inflation

1. Increase in Prices: The primary feature of inflation is the consistent rise in the prices of goods and services across the economy.

2. Decreased Purchasing Power: As prices rise, the value of money decreases, meaning consumers can buy less with the same amount of money.

3. Erosion of Savings: Inflation reduces the real value of savings if the interest rate on savings is lower than the rate of inflation.

4. Redistribution of Wealth: Inflation can benefit debtors (borrowers) because they repay loans with money that is worth less, while creditors (lenders) may lose out.


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