Final answer:
Inflation decreases the purchasing power of money, meaning you can buy less with the same amount of money. It represents a general rise in the level of prices, not just individual items. The inflation rate is measured by the percent change in price indices over time.
Step-by-step explanation:
Inflation can be viewed as decreasing the purchasing power of money over time. Inflation is defined as a sustained increase in the general level of prices for goods and services in an entire economy. As inflation rises, the value of currency decreases, meaning each unit of money buys fewer goods and services than it did in the past. This reduction in purchasing power signifies that the cost of buying goods and services increases relative to the money available, and we experience this as a decrease in how much we can buy with the same amount of money.
Economists measure inflation using price indices, which represent the cost of a standard basket of goods and services. An inflation rate is then determined as the percentage change in these price indices over time. It's important to note that inflation is not simply a change in the cost of individual items, but rather an ongoing general rise in prices across the market. If inflation were to stop after a year, it would no longer be considered inflation.