In a good economy, gradual inflation is considered a good thing, but in tougher economic times, too much inflation is a serious problem. Simply put, inflation occurs when a currency has reduced buying power for goods and services compared to the past. How is inflation measured? What is its impact on the average person? Salman Khan of the Khan Academy explains in a simplified example.
From the first video, you’ll understand:
- The goods and services that go into a consumer price index \(CPI\) calculation
- The effect of a money supply increase on inflation
From the second video, you’ll understand:
- The different components of CPI data
- What “seasonally adjusted” means for monthly inflation numbers