What is meant by the term inflation?

Inflation refers to the rate at which the general level of prices for goods and services rises over a period of time, leading to a decrease in the purchasing power of money. When inflation occurs, each unit of currency buys fewer goods and services than before. It is usually measured by indexes like the Consumer Price Index (CPI) or Producer Price Index (PPI). Moderate inflation is considered a sign of a growing economy, but high or unpredictable inflation can reduce the value of savings, increase the cost of living, and create uncertainty in the market. Central banks often try to control inflation by adjusting interest rates or using other monetary policy tools to maintain economic stability and growth.