← Glossary
Inflation
The general rise in prices over time, which makes each unit of money buy less.
Inflation is usually given as the percentage by which the price of a typical basket of goods and services has risen over a year. If it is 5%, something that cost $100 a year ago costs about $105 today.
Inflation reduces the purchasing power of money. An investment whose return is lower than inflation loses value in real terms, even if its balance grows.