Inflation may be one of the most familiar words in economics. Inflation has plunged countries into long periods of instability. Central bankers often aspire to be known as "inflation hawks." Politicians have won elections with promises to combat inflation, only to lose power after failing to do so.
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure,such as the overall increase in prices or the increase in the cost of living in a country. But it can also be more narrowly calculated - for certain goods, such as food, or for services, such as a haircut, for example. Whatever the context, inflation represents how much more expensive the relevant set of goods and/or services has become over a certain period, most commonly a year.
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