MGT Notes

Reference, ‘Principles of Economics,’ by N. Gregory Mankiw, 3e, Pg 12

In simple terms, inflation represents an increase in the overall level of prices in the economy. It is undersirable since it imposes various costs on society and thus keeping it low is the goal of policymakers. The primary cause of inflation is a growth in the quantity of money in an economy and its large quantity causes its value to fall.