In economics, '''inflation''' is a general rise in the price of [[goods ]] and services in relation to [[purchasing power]]. It is an economic phenomenon whereby [[fiat currency]] is devalued over time due to an increase in the total [[money supply]].
Prices tend to go up when demand from consumers exceeds the normal capacity of producers to supply goods and services. An [[supply and demand|excess supply of goods and services]] tends to put downward pressure on prices.
High inflation undermines the [[economy]]'s ability to generate long-lasting growth and job creation. Consumers and investors may put off purchases because of uncertainty. High inflation erodes the value of incomes and savings. People on fixed incomes, including the elderly and poor are particularly vulnerable to inflation. [[Social Security ]] payments are adjusted to inflation.
The common measure for consumers is the [[Consumer Price Index]] (CPI). Economists [[Economist]]s prefer a broader measure, the "implicit GDP deflator", which includes the prices of non-consumer items like highways and factories.
In the U.S. the inflation rate was near zero in 2009.
[[File:Cpi.jpg|Thumb|400px|CPI (Consumer Price Index) change from previous year]]
==Hyperinflation==
Hyperinflation is out of control inflation and has occurred when there is a massive imbalance between the supply and demand and a complete loss of confidence in the [[currency]]. It has occurred when prices are decontrolled by central governments, like in the [[economic collapse]] of the [[USSR]], where inflation reached over 1000% in some areas. <ref>[http://globalis.gvu.unu.edu/indicator.cfm?IndicatorID=152&Year=1995&Country=UA] Inflation Indicators Ukraine</Ref>
The worst episodes of hyperinflation historically have been in [[Weimar Germany]] in 1923 (after [[World War I]]), [[Hungary]] after [[World War II]], and [[Zimbabwe]] in the late 2000s.
==Politics and inflation==
Bruce Bartlett wrote:
*Inflation is fundamentally a monetary phenomenon. The inflation of the 1970s came about primarily because [[Federal Reserve]] chairman [[Arthur Burns]] gunned the [[money supply]] to get [[Richard Nixon]] re-elected in 1972. He was followed by [[G. William Miller]], appointed by [[Jimmy Carter]]. Miller didn’t have a clue about [[monetary policy]] and only made the dismal inflation situation he inherited far worse. [http://www.nationalreview.com/nrof_bartlett/bartlett200406140846.asp]
==Hyperinflation==
The inflation rate is expressed as a percentage increase in average prices over a year. For example, if the cost of the CPI "basket" rises from $100 one year ago to $102 today, the current inflation rate is 2 per cent. When the CPI rises, the purchasing power of the average consumer's dollar falls.<ref>
Wanniski, Jude. "Money and Tax Rates." In Wanniski. The Way the World Works. 1978.</ref>
==External links==
* [http://www.measuringworth.com/ppowerus/ "Purchasing Power of Money in the United States from 1774 to 2008"], translates the value of a dollar in one year to the value today or any year
====references====
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==see also==
* [[Phillips curve]]
==References==
<Referencesreferences/>
== Sources ==
* [http://www.westegg.com/inflation/ Inflation converter by year]
==See Also==* [[categoryPhillips curve]]* [[Inflation hedge]]* [[Subprime loans]]* [[Economics]]* [[Federal Reserve Bank]]* [[National debt]]* [[Treasury bill]]s* [[Quantitative easing]]* [[Housing bubble]]* [[Economic bubble]] ==External links== * [http://www.measuringworth.com/ppowerus/ "Purchasing Power of Money in the United States from 1774 to 2008"], translates the value of a dollar in one year to the value today or any year [[Category:economicsEconomics]]