Muddog American What Is Inflation?

This is an awesome informative article on what exactly inflation is, what happens with it, and how it effects you.

Muddog American aka Wallace Haile Google Me

Here is a small piece of the article:

"Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.

A similar definition of inflation can be found in Economics by Parkin and Bade:

Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.

Because inflation is a rise in the general level of prices, it is intrinsically linked to money, as captured by the often heard refrain "Inflation is too many dollars chasing too few goods". To understand how this works, imagine a world that only has two commodities: Oranges picked from orange trees, and paper money printed by the government. In a year where there is a drought and oranges are scarce, we'd expect to see the price of oranges rise, as there will be quite a few dollars chasing very few oranges. Conversely, if there's a record crop or oranges, we'd expect to see the price of oranges fall, as orange sellers will need to reduce their prices in order to clear their inventory. These scenarios are inflation and deflation, respectively, though in the real world inflation and deflation are changes in the average price of all goods and services, not just one."

READ MORE: http://economics.about.com/od/helpforeconomicsstudents/f/inflation.htm