Final answer:
Inflation is a sustained increase in the cost of goods and services over time, generally measured by the annual percentage increase. It reflects a broad and ongoing rise in prices across an entire economy, not just a relative change in the price of specific items. The consumer price index is commonly used to measure inflation, with low inflation (1–2%) being a key economic goal.
Step-by-step explanation:
True, inflation is defined as the process by which the cost of goods and services tends to rise over time. It is indeed a sustained increase in the general level of prices, which means that you will need more money to buy the same goods and services you could buy for less before. Inflation is usually measured as an annual percentage increase, and this measurement helps economists, policymakers, and businesses understand the health of the economy.
Inflation is not to be confused with a relative price change, where the price of one good may increase while another decreases. Instead, we are talking about a general and ongoing rise in most markets across the entire economy.
The consumer price index (CPI) is often used to measure inflation. A common goal among economists and central banks is to maintain low inflation, typically around 1-2%, because high inflation rates can erode purchasing power and lead to a decline in the standard of living for individuals whose wages do not keep pace with rising prices.