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Inflation — a sustained increase in the general price level — is one of the most important macroeconomic phenomena. Maintaining low and stable inflation (the UK target is 2%) is a primary objective of the Bank of England's Monetary Policy Committee (MPC). This lesson examines how inflation is measured, the main theories of its causes, and the UK's recent inflationary experience.
| Term | Definition | Example |
|---|---|---|
| Inflation | A sustained increase in the general price level over time | UK CPI inflation of 11.1% in October 2022 |
| Deflation | A sustained decrease in the general price level | Japan experienced deflation for much of the 1990s and 2000s |
| Disinflation | A fall in the rate of inflation (prices still rising, but more slowly) | UK inflation falling from 11.1% in October 2022 to 4.6% in October 2023 |
| Hyperinflation | Extremely rapid and out-of-control inflation, typically exceeding 50% per month | Zimbabwe 2008 (approximately 79.6 billion % per month); Weimar Germany 1923 |
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