Inflation: Difference between revisions

[[File:World Inflation Rate 2019.png|thumb|380px|Inflation in countries around the world in 2019.]]

 

When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the [[purchasing power]] per unit of money{{snd}}a loss of [[real versus nominal value (economics)|real value]] in the medium of exchange and unit of account within the economy.<ref>[http://www.sedlabanki.is/?PageID=195 Why price stability?] {{webarchive|url=https://web.archive.org/web/20081014031836/http://www.sedlabanki.is/?PageID=195 |date=October 14, 2008 }}, Central Bank of Iceland, Accessed on September 11, 2008.</ref><ref>Paul H. Walgenbach, Norman E. Dittrich and Ernest I. Hanson, (1973), Financial Accounting, New York: Harcourt Brace Javonovich, Inc. Page 429. "The Measuring Unit principle: The unit of measure in accounting shall be the base money unit of the most relevant currency. This principle also assumes that the unit of measure is stable; that is, changes in its general purchasing power are not considered sufficiently important to require adjustments to the basic financial statements."</ref> The opposite of inflation is [[deflation]], a sustained decrease in the general price level of goods and services. The common measure of inflation is the '''inflation rate''', the annualized percentage change in a general [[price index]], usually the [[consumer price index]], over time.<ref name="Mankiw 2002 22–32">{{Harvnb|Mankiw|2002|pp=22–32}}</ref>