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Glossary of terms

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Inflation

Inflation relates to:
  • the loss of value of money caused by disproportionate and sudden rising prices;
  • occurs when the quantity of money in circulation exceeds the value of the goods and services offered, or when
  • the public loses confidence in the national currency, precipitating a widespread and sudden rush to convert money into real goods.
 
In mundane terms, inflation happens when suddenly it costs much more money to buy the very same product or service.
 
Inflation can be measured in two different ways:
  1. From the consumption standpoint, inflation is usually measured by a Consumer price index that tracks price changes of a selected "basket" of goods over a given period of time.
  2. However, from the whole GDP (gross domestic product) standpoint, inflation is measured by the GDP deflator, calculated as the ratio of the current and constant prices at which the volume of goods and services that build the GDP may be evaluated.
 
  Online calculator: real value of US dollars after adjusting for inflation.