Inflation is when your purchasing power decreases because the cost of goods or services have increased over a period of time. In simple terms, inflation is when you can’t buy as much with your money as you once could. For instance, if you were able to get a two-bedroom apartment for $1,000 a month ten years ago, but now that same amount will only get you a studio apartment, that could be due to inflation. Likewise, if you could once buy three loaves of your favorite bread for $5 but can only buy one with that amount, inflation is likely the culprit. Measuring inflation is important because it affects consumer spending, interest rates, employment, businesses, and investment returns among others. When inflation climbs higher than wage growth, it could signal the economy is in trouble. Likewise, when inflation is too low, it can result in deflation, which could also signal trouble in economic paradise. low, How Governments Measure Inflation The Consumer Price Index (CPI) is one of the primary ways the government measures inflation and it’s published by the Bureau of Labor and Statistics. The