The inflation rate refers to the percentage increase in the general price level of goods and services over a specific period of time. It measures how fast prices are rising and indicates the rate at which the purchasing power of money is decreasing.
Imagine you have a jar filled with candies, and every year, more candies are added to it. The inflation rate is like measuring how much bigger the jar gets each year. If it grows too quickly, your purchasing power (the number of candies you can buy) decreases.
Deflation: Deflation is the opposite of inflation and refers to a decrease in the general price level of goods and services over time.
Consumer Price Index (CPI): CPI is a measure that tracks changes in the average price level of a basket of consumer goods and services over time.
Hyperinflation: Hyperinflation occurs when there is an extremely high and typically accelerating inflation rate, leading to a rapid decrease in the value of currency.
What is the relationship between the inflation rate and the purchasing power of money?
Which group may consider investing in assets expected to increase in value at a rate higher than the inflation rate to protect against the effects of inflation?
How does severe drought in China affecting the country's inflation rate impact aggregate demand?
When the inflation rate exceeds the expected inflation rate, what happens to the real interest rate?
If the real interest rate is 4% and the inflation rate is 2%, what is the nominal interest rate?
When the inflation rate is lower than the expected inflation rate, what happens to the real interest rate?
If the inflation rate is higher than the nominal interest rate, what can happen to the real interest rate?
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