Inflation refers to a sustained increase in the general price level of goods and services over time. A temporary or limited price increase in a specific industry does not constitute inflation. Inflation is undesirable as it causes price instability and affects consumer purchasing decisions. While some price increases are inevitable, the government's goal is to keep the rate of inflation as low as possible to promote price stability. Inflation is measured using price indexes like the consumer price index. There are two main types of inflation - demand-pull inflation, which occurs when demand outpaces supply, and cost-push inflation, which results from increased production costs that get passed onto consumers in the form of higher prices. The ultimate effects of inflation are a decrease in purchasing

1. Inflation

2. Inflation
 Refers to the increase in general level of prices of gods and services
 A reality that the price level oftentimes changes and generally rises.

3. Two important points:
 1. Inflation refers to a condition where there is a sustained or prolonged
increase in the price level
 2. Price of some goods may rise due to several factors such as weather,
competition, market condition etc. without necessarily being inflationary.

4.  Price increase that is limited to specific industries or to some types of goods, or
of short duration, price movement is not considered as inflation.
 Inflation is undesirable, because it causes price instability. Affects the decision
of consumers in their purchase of goods and services.
 Since the government wants to promote price instability, its task is to prevent
inflation. Surely this is not possible as prices are expected to increase in the
course of time. The best thing the government must do is to keep the rete of
inflation at the lowest possible level.
 There is no exact percentage at which one may say that there is instability in
the price level. Bottom line is that, when a given rate affect consumers decision
in their purchase of goods and services, then there is inflation and there is price
instability, otherwise there is none.

5. Measuring Inflation
 Changes in the price of goods and services are measured through the o
called price indexes.
 Most common is the consumer price index (CPI)

6. Types of inflation:

7. Demand-Pull Inflation
 This type of inflation results from an increase on demand for goods and
services. When for any reason the aggregated demand increases, prices
will also increase.
 Higher demand ‘pulls’ price upward
 When the supply of goods and services cannot cope up with increase in
demand and consumer spending, prices will go up.

9. Cost-Push Inflation
 This type of inflation is caused by an increased in the cost production.
 It is called cost-push inflation because it is the change in production cost
that ‘pushes’ the prices of goods and services upward.

11. Effects of inflation:
 The ultimate effect of inflation is to decrease the purchasing power of our money.
As such, it follows that the entire population is affected.
 Another effect is redistribution of wealth.
 This is because certain group of person gains from inflation while others suffer from it.

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