Inflation refers to the sustained increase in the general level of prices for goods and services within an economy over time. It means that, on average, the purchasing power of money decreases as prices rise. Inflation occurs when there is an imbalance between the supply and demand for goods and services, leading to upward pressure on prices. It can be influenced by various factors, including changes in money supply, government policies, production costs, and consumer spending. Inflation can have both positive and negative impacts on the economy, affecting individuals' purchasing power, business costs, investment decisions, and overall economic stability. Central banks often aim to manage inflation through monetary policies to maintain price stability.