3. What are the causes of inflation? How is inflation measured?

What are the pros and cons of inflation?

Most of us only think of inflation as a bad thing, because it means things are getting more expensive. And while there are downsides to inflation, it can have upsides, too.

Pros of inflation

First of all, a moderate amount of inflation is a sign of economic growth. It’s normal that when the economy is healthy, inflation rises a bit.
There’s another benefit to inflation, one that most consumers would probably find to be a good thing. As the value of a dollar decreases, so does the value of debt. Incomes typically rise as inflation rises, meaning your monthly debt payments can take up a smaller part of your income.

Cons of inflation

The downsides of inflation are perhaps more readily apparent. Inflation decreases the value of a dollar and makes goods and services more expensive.
While these rising costs are always inconvenient, they can become especially dangerous when incomes aren’t rising at the same rate as inflation.
Inflation can also be detrimental to savings and retirement accounts. The money you’ve saved isn’t worth as much as when you earned it, which might mean the money doesn’t go as far when you retire.