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What is inflation, and why does it happen?


The prices for goods and services around the world are constantly rising, which is an economic phenomenon called inflation.  

Although most countries welcome some level of inflation it is not a good idea for any economy. However, excessive increases or decreases in prices could be harmful. 

Joumanna Bercetche, CNBC’s anchor, said that economists now believe that inflation can be beneficial.

“It’s something like Goldilocks. It doesn’t need to be too hot or too cold. Bercetche said that you want it to be somewhere in between.

Inflation is usually a sign that a functioning, productive, and growing economy has a healthy balance of all three.

The video below will explain how inflation is measured, and the reasons governments want to keep it under control.