Inflation is the rate at which the general level of prices for goods and services is rising, eroding the purchasing power of a currency. It is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI). When inflation occurs, each unit of currency buys fewer goods and services than it did before.

Inflation can be caused by various factors. Some common causes include an increase in the money supply, demand-pull inflation due to increased consumer demand, cost-push inflation due to rising production costs, and inflation expectations among consumers and businesses.

Inflation can have both positive and negative effects. Some positive effects include stimulating economic growth, reducing the burden of debt, and encouraging investment. However, inflation can also lead to reduced purchasing power, erode savings, create uncertainty, and disrupt long-term planning for individuals and businesses.

There are various methods to control inflation. Central banks can use monetary policy tools such as adjusting interest rates, open market operations, or reserve requirements to influence the money supply. Governments can also implement fiscal policies like taxation and government spending to manage inflation. Additionally, supply-side reforms and addressing structural issues in the economy can help control inflation in the long run.