Inflation

Definition

An increase in the general level of prices over time, which reduces how much the same amount of money can buy.

Inflation describes a broad rise in prices across the economy. Economists track it by comparing price indexes over time. When inflation slows but stays positive, the overall price level keeps rising at a slower pace.

Example

A representative basket of goods and services costs $100 last year and $103 this year. Prices for that basket rose 3%.