From the course: Economic Indicators

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What is inflation?

What is inflation?

From the course: Economic Indicators

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What is inflation?

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- Do you remember when a can of soda was 25 cents, or maybe you just know someone who does, what happened? Well, there's been inflation and that's when there's a rise in prices across the entire economy over time. Milk prices, home prices, car prices, and the price of almost everything are higher now than they were 30 years ago and the reason is inflation. Inflation makes the prices rise for essentially all goods and services you buy. It means you can buy less stuff with the dollars you have. How much stuff you can buy with your dollars is called purchasing power and when inflation happens, you can buy less stuff and that's an erosion of your purchasing power. It's why a dollar today doesn't buy what it used to. This makes inflation a critical economic factor to watch for policy makers, traders, and for your own savings and investments. Today, the ideal situation for businesses, banks, and the economy is when inflation is gradual, low, and stable. You like to be able to predict if…

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