Stock Market Investors » Glossary of Stock Terms » What is Inflation?

What is Inflation?

One of the threats of your profits is inflation. The latter is defined as a constant increase in the level of consumer prices or a decrease in the purchasing power of money (you can buy fewer things with the money you possess).

As a result of the inflation the prices of the goods and services rise significantly without being accompanied by the corresponding extra value.

Another effect of inflation is increased interest rates. This in turn usually leads to a slow down in the economy. The result of a cooling economy that persists for a long time may be recession, which if persists may result in depression.

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