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Business Definition for: inflation
Dictionary of Accounting Terms
inflation

general rise in the price level. When inflation is present, a dollar today can buy more than a dollar in the future. In the presence of hyperinflation, with prices rising at 100% a year or more, there is a tendency for people to prefer hard assets (such as real estate and precious metals) to financial assets (stocks and bonds) in their investment choices.

Dictionary of Finance and Investment Terms
inflation

rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market-in other words, too much money chasing too few goods. Moderate inflation is a common result of economic growth. Hyperinflation, with prices rising at 100% a year or more, causes people to lose confidence in the currency and put their assets in hard assets like real estate or gold, which usually retain their value in inflationary times.

See also demand-pull inflation , cost-push inflation
Dictionary of Banking Terms
inflation

economic condition characterized by an increase in prices and wages, and declining purchasing power. Inflation is usually measured by changes in the Consumer Price Index (CPI). The result is diminished purchasing power, and frequently a lower rate of savings as wage earners put more of their disposable assets in consumption, and less in long-term savings. Inflation is a monetary phenomenon. It occurs when there is too much money in circulation relative to the production of actual goods and services. Federal reserve monetary policy is the only means of controlling inflation, although fiscal policy can help as well.

See also hyperinflation , deflation , disinflation
Dictionary of Business Terms
inflation

rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market; in other words, too much money chasing too few goods.

See also Consumer Price Index (CPI) , cost-push inflation , demand-pull inflation
Dictionary of Real Estate Terms
inflation

a loss in the purchasing power of money; an increase in the general price level. Generally measured by the consumer price index , published by the Bureau of Labor Statistics.

Example: Real estate is considered a hedge against inflation because it tends to be long-lasting and holds its value in real terms. As the value of the dollar drops, real estate tends to command more dollars. Ahome that was purchased in 1967 for $50,000, resold in 1976 for $100,000 and in 2005 for $400,000. The home did nothing to cause its price to change; inflation caused the house to command more dollars.

Related Terms:
demand-pull inflation

price increases occurring when supply is not adequate to meet demand.

cost-push inflation

inflation caused by rising prices, which follow on the heels of rising costs. This is the sequence: When the demand for raw materials exceeds the supply, prices go up. As manufacturers pay more for these raw materials they raise the prices they charge merchants for the finished products, and the merchants in turn raise the prices they charge consumers.

hyperinflation
deflation

the opposite of inflation. A decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending, or investment spending. Deflation has often had the side effect of increasing unemployment, since the process often leads to a lower level of demand in the economy. Other downside effects include possible pay cuts and more expensive repayment of consumer debts. The upside of falling prices is that mild deflation would assure working people (at least those who fend off pay cuts) of steadily rising real wages.

disinflation

slowing down of the rate at which prices increase- usually during a recession, when sales drop and retailers are not always able to pass on higher prices to consumers. Not to be confused with deflation, when prices actually drop.

Consumer Price Index (CPI)

measure of price level computed by the Bureau of Labor Statistics on a monthly basis. It is the ratio of the cost of specific consumer items in any one year to the cost of those items in the base period, 1982-1984 = 100. Because the CPI includes things consumers buy regularly, it is frequently called the cost of living index, The so-called market basket, covered by the index, includes items such as food, clothing, automobiles, homes, and fees to doctors.

cost-push inflation

inflation caused by rising prices, which follow on the heels of rising costs. This is the sequence: When the demand for raw materials exceeds the supply, prices go up. As manufacturers pay more for these raw materials they raise the prices they charge merchants for the finished products, and the merchants in turn raise the prices they charge consumers.

demand-pull inflation

price increases occurring when supply is not adequate to meet demand.

Referring Terms:
Employment Cost Index (ECI)
cost-push inflation
hyperinflation
wage-push inflation
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.
 Copyright © 2006, 2003, 1998, 1995, 1991, 1987, 1985 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright c 2006, 2000, 1997, 1993, 1990 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2007, 2000, 1997, 1987, by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
 Copyright © 2004, 2000, 1997, 1993, 1987, 1984 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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