Intlation. What is intlation

Ancient China[edit]
Song Dynasty China introduced the practice of printing paper money to create fiat currency.^[28] During the Mongol Yuan Dynasty, the government spent a great deal of money fighting costly wars, and reacted by printing more money, leading to inflation.^[29] Fearing the inflation that plagued the Yuan dynasty, the Ming Dynasty initially rejected the use of paper money, and reverted to using copper coins.^[30]
Medieval Egypt[edit]
During the Malian king Mansa Musa's hajj to Mecca in 1324, he was reportedly accompanied by a camel train that included thousands of people and nearly a hundred camels. When he passed through Cairo, he spent or gave away so much gold that it depressed its price in Egypt for over a decade,^[31] reducing its purchasing power. A contemporary Arab historian remarked about Mansa Musa's visit:
Gold was at a high price in Egypt until they came in that year. The mithqal did not go below 25 dirhams and was generally above, but from that time its value fell and it cheapened in price and has remained cheap till now. The mithqal does not exceed 22 dirhams or less. This has been the state of affairs for about twelve years until this day by reason of the large amount of gold which they brought into Egypt and spent there [...].
— Chihab Al-Umari, Kingdom of Mali^[32]
"Price revolution" in Western Europe[edit]
From the second half of the 15th century to the first half of the 17th, Western Europe experienced a major inflationary cycle referred to as the "price revolution",^[33][34] with prices on average rising perhaps sixfold over 150 years. This is often attributed to the influx of gold and silver from the New World into Habsburg Spain,^[35] with wider availability of silver in previously cash-starved Europe causing widespread inflation.^[36][37] European population rebound from the Black Death began before the arrival of New World metal, and may have began a process of inflation that New World silver compounded later in the 16th century.^[38]
Measures[edit]
See also: Consumer price index

US Consumer Price Index (CPI) 1969 to 2019, obtained from the FRED Database. Inflation is the increase in the CPI.

Since there are many possible measures of the price level, there are many possible measures of price inflation. Most frequently, the term "inflation" refers to a rise in a broad price index representing the overall price level for goods and services in the economy. The Consumer Price Index (CPI), the Personal consumption expenditures price index (PCEPI) and the GDP deflator are some examples of broad price indices. However, "inflation" may also be used to describe a rising price level within a narrower set of assets, goods or services within the economy, such as commodities (including food, fuel, metals), tangible assets (such as real estate), financial assets (such as stocks, bonds), services (such as entertainment and health care), or labor. Although the values of capital assets are often casually said to "inflate," this should not be confused with inflation as a defined term; a more accurate description for an increase in the value of a capital asset is appreciation. The Reuters-CRB Index (CCI), the Producer Price Index, and Employment Cost Index (ECI) are examples of narrow price indices used to measure price inflation in particular sectors of the economy. Core inflation is a measure of inflation for a subset of consumer prices that excludes food and energy prices, which rise and fall more than other prices in the short term. The Federal Reserve Board pays particular attention to the core inflation rate to get a better estimate of long-term future inflation trends overall.^[39]
The inflation rate is most widely calculated by determining the movement or change in a price index, typically the consumer price index.^[40] The inflation rate is the percentage change of a price index over time. The Retail Prices Index is also a measure of inflation that is commonly used in the United Kingdom. It is broader than the CPI and contains a larger basket of goods and services.
To illustrate the method of calculation, in January 2007, the U.S. Consumer Price Index was 202.416, and in January 2008 it was 211.080. The formula for calculating the annual percentage rate inflation in the CPI over the course of the year is: {\displaystyle \left({\frac {211.080-202.416}{202.416}}\right)\times 100\%=4.28\%}  The resulting inflation rate for the CPI in this one-year period is 4.28%, meaning the general level of prices for typical U.S. consumers rose by approximately four percent in 2007.^[41]
Other widely used price indices for calculating price inflation include the following:

• 
  Producer price indices (PPIs) which measures average changes in prices received by domestic producers for their output. This differs from the CPI in that price subsidization, profits, and taxes may cause the amount received by the producer to differ from what the consumer paid. There is also typically a delay between an increase in the PPI and any eventual increase in the CPI. Producer price index measures the pressure being put on producers by the costs of their raw materials. This could be "passed on" to consumers, or it could be absorbed by profits, or offset by increasing productivity. In India and the United States, an earlier version of the PPI was called the Wholesale price index.
  
• 
  Commodity price indices, which measure the price of a selection of commodities. In the present commodity price indices are weighted by the relative importance of the components to the "all in" cost of an employee.
  
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  Core price indices: because food and oil prices can change quickly due to changes in supply and demand conditions in the food and oil markets, it can be difficult to detect the long run trend in price levels when those prices are included. Therefore, most statistical agencies also report a measure of 'core inflation', which removes the most volatile components (such as food and oil) from a broad price index like the CPI. Because core inflation is less affected by short run supply and demand conditions in specific markets, central banks rely on it to better measure the inflationary impact of current monetary policy.
  

Other common measures of inflation are:

• 
  GDP deflator is a measure of the price of all the goods and services included in gross domestic product (GDP). The US Commerce Department publishes a deflator series for US GDP, defined as its nominal GDP measure divided by its real GDP measure.
  

∴ {\displaystyle {\mbox{GDP Deflator}}={\frac {\mbox{Nominal GDP}}{\mbox{Real GDP}}}}

•