Inflation

Inflation is a sustained rise in prices across the entire economy. Inflation is related to economic boomtimes, and since WW II prices have generally risen in the developing world. Stagflation is the phenomenon of inflation when accompanied by economic stagnation.

Central banks seek price stability in an economy, and typically try to limit inflation, especially if the economy heats up and inflation appears to be getting out of control. An inflation rate around 2% is considered ideal, to prevent the possibility of deflation.

Broad-based price indexes such as the Consumer Price Index (CPI) measure the rate of inflation. These indexes can vary month over month due to volatile costs such as fuel and food, so some economists remove these volatile costs to focus on core prices.

Hyperinflation occurs when inflation gets out of control and prices increase exponentially, particularly as a currency loses its value. Hyperinflation occurred in the Weimar Republic of Germany (1923) and is a phenomenon in present-day Zimbabwe.