What is inflation and why is it bad?

Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It means that the purchasing power of a currency has decreased. Inflation is usually measured by the Consumer Price Index (CPI), which is the weighted average of the prices of a basket of goods and services that people typically buy.

High inflation can be bad for an economy because it can lead to a decrease in the value of money, which reduces consumer purchasing power, savings, and investments. It can also lead to an increase in interest rates, which can discourage borrowing and spending. This, in turn, can lead to a decrease in production and employment, which can lead to a recession. Additionally, inflation can create economic instability and uncertainty, making it difficult for businesses and households to plan and invest for the future.