Inflation is the increase in the prices of goods and services over time. It occurs at a specific rate according to the countries consumer price index.
Why It's Important
As prices rise, your money buys less than it used to. You know when the older generation says, "Well, back in my day, this _____ used to cost $0.10!" So, why doesn't that same item cost $0.10 today? One word: Inflation! Ronald Reagan said, "Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man." It is true! If inflation goes unchecked, it could wreak havoc on the economy. In the US, the Federal Reserve (remember them?) curbs inflation by implementing monetary policy (printing new money, raising interest rates, etc.)
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