ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate. So if inflation is 3%, it means prices are 3% higher (on average) than they were a year ago.

Detailed explanation-2: -Too much inflation is generally considered bad for an economy, while too little inflation is also considered harmful. Many economists advocate for a middle ground of low to moderate inflation, of around 2% per year.

Detailed explanation-3: -While high inflation is generally considered harmful, some economists believe that a small amount of inflation can help drive economic growth. The opposite of inflation is deflation, a situation where prices tend to decline. The Federal Reserve targets a 2% inflation rate, based on the Consumer Price Index (CPI).

Detailed explanation-4: -During the observation period from 1960 to 2021, the average inflation rate was 3.8% per year. Overall, the price increase was 829.57%. An item that cost 100 dollars in 1960 costs 929.57 dollars at the beginning of 2022. For January 2023, the year-over-year inflation rate was 6.4%.