What does inflation mean?

Inflation generally refers to the phenomenon that the money supply is greater than the actual demand of money, that is, the actual purchasing power is greater than the output supply, which leads to the devaluation of money, thus leading to a sustained and general increase in prices for a period of time.

Inflation in modern economics refers to the rise of the overall price level. Generalized inflation refers to the decline in the market value or purchasing power of money, while currency depreciation refers to the decline in the relative value between two economies. The former is used to describe the value of domestic currency, while the latter is used to describe the added value in the international market. The correlation between them is one of the disputes in economics.

The effects of inflation on residents' income and consumption are as follows: (1) The actual income level drops; (2) The income effect and substitution effect of rising prices lead to the decline of welfare; (3) Income distribution effect of inflation: Specifically, the welfare of low-income people (those with less endowment) is damaged, but high-income people (those with more endowment) can benefit; Those who earn income from wages, rents and interest will suffer from inflation; And people whose main income is profit may make a profit.