Inflation: What It Is, Types, Measurement, & Control

This podcast provides a comprehensive understanding of inflation, defined as the gradual loss of purchasing power reflected in a broad rise in prices for goods and services over time. It explores the types of inflation, specifically demand-pull inflation, where increased demand outpaces supply, cost-push inflation, resulting from rising production inputs like commodity prices, and built-in inflation, driven by adaptive expectations and a wage-price spiral.

The overview details how inflation is measured using various price indexes, including the widely used Consumer Price Index (CPI), the Wholesale Price Index (WPI), and the Producer Price Index (PPI). The Personal Consumption Expenditures (PCE) Price Index is also highlighted as the primary index the Federal Reserve uses to monitor inflation.

Furthermore, the overview discusses the causes of inflation, linking it primarily to an increase in the money supply and factors like supply bottlenecks, and its impact on prices, cost of living, and economic growth. It covers the advantages and disadvantages of inflation and strategies for controlling inflation through monetary policy actions by the central bank (like the Federal Reserve in the U.S.), often involving adjustments to interest rates. The concepts of deflation (general price decline) and disinflation (slowing positive inflation rate) are also distinguished. The overview also touches on hedging against inflation through investments in tangible assets like commodities, real estate, and Treasury Inflation-Protected Securities (TIPS).