Inflation The general rise in the price of goods and services is calledInflation. The percentage increase in the average price level over one year is called inflation rate. For example- inflation rate is 5% means that on average prices of consumer goods are rising at the rate of 5% per annum.

When inflation rate is too high i.e. prices are changing on hourly or daily basis, then it is called hyperinflation. Purchasing power of the consumers wears away too quickly.