What does inflation mean?

Inflation, referred to as inflation, refers to the state that the overall price level continues to rise relative to a specific amount of money (purchasing power). Unlike currency devaluation, overall inflation is the decline of currency value in a specific economy, while currency devaluation is the decline of relative value of currencies among economies. The former affects the domestic value of money, while the latter affects the value of money in the international market. The correlation between them is one of the disputes in economics.

Because different prices affect different people, there are many different ways to measure inflation. The two most common indicators are consumer price index and GDP deflator. The former measures the book consumer price, while the latter measures the inflation of emerging goods and services.

Mainstream economists' views on the causes of inflation can be roughly divided into two factions. Monetarists believe that money is the most important influence on the inflation rate, Keynesians believe that the interaction among money, interest rate and output is the most important influence, and Keynesians also tend to add the inflation of means of production (capital) to the inflation of general standard consumer goods. Other theories, such as the Austrian school, believe that inflation is caused by the central bank increasing the money supply.

Related concepts include: deflation, also known as deflation, refers to the decline of the overall price level. Deflation means a decrease in the rate of inflation. Hyperinflation means that inflation is out of control and increasing rapidly. Stagflation, also known as stagflation, refers to the simultaneous rise of inflation rate and unemployment rate. Inflation refers to trying to raise prices to counter the pressure of reflation.

In classical political economy, "inflation" means increasing the money supply, while "deflation" means reducing the money supply. The purpose of increasing money supply is to adapt to the growth of real GDP. Economists of some schools, usually classified as liberals, classical liberals or ultra-conservatives, still use this usage. In mainstream personal capital, this is called expansionary and contractive monetary policy.

Some scholars believe that the Chinese word "inflation" literally gives people the association that the value of inflation itself increases, and it is suggested to rename it "price inflation", but it has not been widely used.