Inflation rates. Inflation is the sustained increase in the price of goods and services in a country. It is a lagging indicator, as it is the result of economic growth or decline.
During periods of economic growth, there is likely to be an increase in inflation. A high rate of inflation can have a severe impact on the price of a country’s currency, decreasing its purchasing power and making it more expensive for consumers to buy products – at least nominally. It can also have an impact on other macroeconomic indicators, as it can lead to decreases in employment and GDP growth. High inflation rates lead to a rising of interest rates, as governments attempt to get prices under control.
During periods of economic downturn, there can be declining levels or inflation or even ‘deflation’ – when inflation falls below 0%. This might sound positive, but in fact it is confirmation that consumers have reduced their spending. This is often accompanied by reduced money supply, declining retail sales, and rising unemployment rates.
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