James Earnest Investments

Investopedia says: Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year.

Most countries' central banks will try to sustain an inflation rate of 2-3%.