Inflation

Question: What is Inflation?

Answer: Inflation is when the prices of most goods and services continue to creep upward. It is measured by the Consumer Price Index [CPI]. .

Inflation can affect different parts of the economy at different times. For example, oil prices move up and down rapidly, because they are driven by the bids on the price of oil futures contracts. As a result, gas prices are also very volatile. This can drive up the price of food, which is usually transported long distances. For this reason, the price of food and energy is left out of the core inflatio rate. This is used by the Federal Reserve as a better indicator of true inflation.


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