Inflation & Cost of Living

EconomicsStarter Level

10 flashcards

Card 1 of 1010%

Question

What is inflation and why does it matter?

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Answer

Definition

Inflation is the general increase in prices of goods and services over time. It matters because it erodes purchasing power, meaning you can buy less with the same amount of money.

Example

If a loaf of bread costs $2 today and inflation is 3%, next year it will cost about $2.06.

Quick Tip

Inflation = rising prices!

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