Inflation Law and Legal Definition

Inflation is a persistent increase in the average price level in the economy. Inflation occurs when the average price level (that is, prices in general) increases over time. This does not mean that all prices increase the same, nor that all prices necessarily increase. Some prices might increase a lot, others a little, and still other prices decrease or remain unchanged. Inflation results when the average of these assorted prices follows an upward trend. Inflation is the most common phenomenon associated with the price level.

Inflation's effects on an economy are manifold and can be simultaneously positive and monetary items over time, uncertainty over future inflation may discourage investment and savings, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include a mitigation of economic recessions,[5] and debt relief by reducing the real level of debt.