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What Is Inflation?

Inflation is the rate at which the general level of price rises against the purchasing power of a currency.

Inflation, or the increase in price of goods and services, is caused by an increase in the money supply. Inflation measures general trends in price and can have positive effects, including the ability of central banks to control interest rates and encourage investments, but also negative effects, such as uncertainty of future inflation, which can discourage saving. Inflation can be controlled by governments and central banks using monetary policy, fixed exchange rates, price controls and other methods.