Inflation refers to the overall increase in the cost of goods and services within a specific period of time. Inflation often arises when too much money is circulated, and the demand for goods and services exceeds the supply. Between 1914 and 2022, the United States's inflation rate was moderate and stood at around 3.27 percent.

Inflation can reduce people’s purchasing power. A reduction in purchasing power means that people cannot buy the same quantity of goods that their money could cover in the past.

Inflation also negatively impacts investments. This implies that the cost of goods and services over time will also impact the fixed return on specific investments. Similarly, due to the cost of production, inflation might contribute to reduced stock prices.

Also, inflation can push low-income households into poverty. Low-income households spend much of their income on necessities like food, transportation, and housing. Inflation might deprive them of access to these necessities.