Inflation

Purchasing Power

The real goods and services that money can buy, determining the value of money.

Inflation

A rise in the general level of prices in an economy, causing a decline in purchasing power.

Inflation Rate

The percentage of increase in prices in the economy.

Deflation

A prolonged decline in the general level of prices in an economy.

Shrinkflation

Reduction in the size or quantity of products while charging the same price or more.

GDP Deflator

Removes the effects of inflation from GDP, enabling year-to-year economic comparisons.

Consumer Price Index (CPI)

A measure of the overall cost of goods and services bought by a typical consumer.

Market Basket

A collection of goods and services that the typical consumer buys, used to calculate CPI.

Substitution Bias

Consumers substituting expensive goods for cheaper goods, affecting CPI accuracy.

Producer Price Index (PPI)

Measures the cost of a basket of goods and services bought by firms rather than consumers.