It is the rate of change of general price level

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Over time we observe prices of goods and services we buy increase. Often this price increases are quite visible but sometimes grocery stores use ingenious ways to conceal the rising prices. I am sure you have noticed that grocers instead of raising prices, they often reduce the quantity; you tend to notice packages are getting smaller. Put differently the unit price of the product is rising. That is why the Federal government mandated to show the unit price in addition to the products price, so that the consumer can compare products fairly before purchasing. This rising price levels is called inflation.

What is inflation? It is the rate of change of general price level? A natural question to ask is "What is the general price level"? How do we measure the general price level?

Reference no: EM132274996

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