Understanding how inflation affects our economy is key to
grasping how our system truly works. However, the first step in
this process, though, is learning more about the general nature
of inflation. Inflation occurs when the value of money begins to
fall, thereby decreasing purchasing power. There are a number of
ways to measure inflation in the United States, and it is worth
noting that inflation is greatly different from currency
devaluation. The primary symptom of inflation is a rise in
prices of consumer goods. While many would suggest that the
lower the rate of inflation, the better the market is for
consumers, this simply isn’t the case. In fact, you may have
recently heard members of the federal government suggesting that
they will use resources like the central bank to create and
maintain certain levels of inflation as necessary for our
economy. Former Fed Chair Greenspan even said that a fall in
inflation rates would ruin our economy as a whole. Excessive
inflation, though, can be as problematic as