What happens during inflation

Inflation is the increase in the general price level of goods and services in an economy over a period of time. This causes the purchasing power of a currency to decrease, as each unit of currency buys fewer goods and services.

During inflation, the cost of living generally goes up, leading to higher prices for everyday items such as groceries, rent, and transportation. This can erode savings and fixed incomes, making it more difficult for individuals to afford basic necessities.

Inflation can also have economic implications, such as reducing the competitiveness of a country's exports in the global market and increasing uncertainty for businesses in terms of pricing and investment decisions.

Central banks and governments typically try to control inflation through various monetary policy tools, such as adjusting interest rates and conducting open market operations. However, high inflation can be difficult to control and can have long-lasting effects on an economy.