What is inflation?
Inflation measures how much more expensive an item or service is over a year, it is the rate of which prices increase. The inflation rate is represented in a percentage. Inflation occurs when purchase power decreases in the economy. An example of inflation is when a unit of currency buys less than what it did in the past. Deflation is when the price for goods and services decrease as the purchasing power increases.

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Three types of inflation classes
Demand pull-inflation - This is when an increase of money supply and credit, over stimulates the demand. Where there is more money there is higher incentive, higher prices.

Cost-push inflation - This occurs when supplies decrease while the demand remains high.
Built-in inflation - This occurs when there is a rise in wages.

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Causes and Effects
The cost of living is disrupted when inflation rises. When a country or nation's money supply outgrows its economic growth inflation is likely to occur. Printing more money is a factor that causes inflation. Legally reducing the value of a legal tender currency will cause inflation. Loaning new money into an existing reserve account is also a factor with inflation.

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