A persistent tendency for prices and money wages to increase. Inflation is measured by the proportional changes over time in some appropriate price index, commonly a consumer price index or a GDP deflator. Because of changes in the type and quality of goods available, measures of inflation are probably not reliable to closer than a margin of 1 or 2 per cent a year, but if prices rise faster than this there is no doubt that inflation exists. Economists have attempted to distinguish cost and demand inflation. Cost inflation is started by an increase in some element of costs, for example the oil price explosion of 1973-4. Demand inflation is due to too much aggregate demand. Once started, inflation tends to persist through an inflationary spiral, in which various prices and wage rates rise because others have risen. The inflation tax is the real cost to the holders of money due to its loss of real purchasing power during inflation. hyperinflation is extremely rapid inflation, in which prices increase so fast that money largely loses its convenience as a medium of exchange.

See also:

core inflation, cost inflation, creeping inflation, demand inflation, expected inflation, imported inflation, menu costs of inflation, repressed inflation, shoe-leather costs of inflation, underlying rate of inflation, and unexpected inflation

• accounting period
• accounts
• accounts, consolidated
• accounts payable
• accounts receivable
• accumulation, capital
• acid rain
• acquisition
• acquisition company
• ACT
• action
• actuarially fair odds
• actuary
• adaptive expectations
• adequacy, capital
• adjustable peg
• adjustment
• adjustment costs
• adjustment, price and quantity
• adjustment programme
• adjustment to factor cost
• administered price
• administration
• ad valorem tax
• Advance Corporation Tax