Inflation

Inflation refers to the rise in the overall price level of goods and services over time.

For instance, in 1980, a dozen eggs in the U.S. cost $0.88, but by early 2025, the price rose to $5.90—showing how money buys fewer goods over time.

Inflation often arises when the money supply expands faster than the production of goods and services.

Imagine everyone suddenly has twice as much money, but the quantity of goods stays the same.

With more money chasing the same quantity of goods, demand increases and pulls the overall price level up.

Inflation can also occur when production costs increase, such as a rise in the cost of fuel or wages.

But, a slow, steady rise in prices can benefit the economy. It encourages people to spend rather than save money that’s losing value. This boosts demand, prompting businesses to produce more and hire more workers.

However, when prices rise too rapidly, it becomes problematic. Incomes often fail to keep pace with the rising cost of living. Savings lose value, and essentials become harder to afford for the average consumer.