Chapter 21
Inflation
Book
Version 3
By Boundless
By Boundless
Boundless Economics
Economics
by Boundless
Section 1
Defining, Measuring, and Assessing Inflation
![Thumbnail](../../../../../figures.boundless-cdn.com/20570/square/m2andinflation.jpg)
Defining Inflation
Inflation is an increase in average price levels.
![Thumbnail](../../../../../figures.boundless-cdn.com/20611/square/us-inflation-rate.jpg)
Measuring Inflation
Inflation is measured as a percentage rate of change in the level of prices.
![Thumbnail](../../../../../figures.boundless-cdn.com/20610/square/r-price-index-us-1913-2004.jpg)
Price Indices and the Rate of Change of Prices
Price indices are tools used to measure price changes for a specific subset of goods and services.
![Thumbnail](../../../../../figures.boundless-cdn.com/20647/square/del-taco-menu-board.jpeg)
The Costs of Inflation
The costs of inflation include menu costs, shoe leather costs, loss of purchasing power, and the redistribution of wealth.
![Thumbnail](../../../../../figures.boundless-cdn.com/20648/square/malawi-interest-rates.jpeg)
Distribution Effects of Inflation
Unexpectedly high inflation tends to transfer wealth from creditors to debtors and from the rich to the poor.
Deflation
Deflation is a decrease in the general price levels of goods and services.
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