Bob Brinker's Marketimer

  Tuesday November 21, 2017

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WHAT IS INFLATION?
Learn even more about this topic with the Encyclopedia of Personal Finance™

Inflation is the rate of increase in price levels of goods and services in the economy.

When the prices of many of the goods and services we purchase rise, we have inflation. Inflation is not considered harmful to the economy as long as it is held under control. However, there have been a few instances in our recent history when inflation became a problem for our economy?most notably in the 1970s when double-digit inflation grew faster that most people's income.

One measure of inflation is the Consumer Price Index (CPI).

The CPI takes a representative basket of goods in our economy and tracks their price levels. The extent to which the price levels of these goods increase from period to period is the inflation for that period.

Now that we have a general understanding of inflation, let's look at how inflation can wreak havoc with our investments in bonds and other fixed-income securities.




LEARN EVEN MORE WITH THE ENCYCLOPEDIA OF PERSONAL FINANCE. CLICK HERE!

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