inflation
in-FLAY-shun
/ɪnˈfleɪ.ʃən/
A general increase in prices and corresponding decline in the purchasing value of money over time.
Focuses on a broad-based, persistent rise in overall market price levels rather than a price hike on one item.
The story behind the word. Originally, inflatio described blowing air into a balloon to swell it up. During the American Civil War, paper money ('greenbacks') was printed in huge quantities without gold backing, causing paper money to swell artificially in volume. Financial writers described the money supply as being 'inflated', leading to our modern economic term.
Word relationships
- price rise: 'Price rise' refers to increased cost for specific goods, whereas 'inflation' refers to systemic currency purchasing power decline.
- devaluation: 'Devaluation' specifically refers to official government reduction in currency value against foreign currencies.
- deflation: A sustained decrease in the general price level of goods and services.
Commonly confused with
- stagflation: Stagflation is a specific, toxic combination of stagnant economic growth combined with high inflation.
Word family
- inflate (verb): To expand with air or increase financial price levels.
- inflationary (adjective): Tending to cause or accompany economic inflation.
Collocations
- inflation rate
- hyperinflation
- core inflation
- inflation pressures
Idioms & expressions
- hedge against inflation
Example sentences
- "Central banks raise interest rates primarily to tame runaway inflation and protect purchasing power." Monetary policy (The Economist)
- "As inflation accelerated, families noticed that their weekly grocery budget bought significantly fewer items." Household economics
Memory hook
Like blowing air into a balloon (IN-FLATE), prices expand until money's value gets thin. Prices expanding like a blown-up balloon.
When not to use
Do not use for a temporary price jump in a single product; inflation requires broad currency devaluation across a whole basket of goods.
Fun facts
- Before the 1860s, 'inflation' was strictly a medical term for gas swelling in the stomach!
Related words
Explore more words
Bubble, Depreciation, Devaluation, Monetary Policy, Expansion, Currency
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