Inflation / deflation definition

Inflation is normally defined as a measure of a general rise in prices of goods and services in an economy and is expressed as a percentage change per year. It is calculated from looking at the weighted average price of a basket of goods and services. The exact choice of the composition of the basket may vary from country to country and from time to time so there may be dispute over different possible measures. Indeed governments may publish more than one inflation measure corresponding do different types of basket. All these different possible basket selections result in a situation where different economists may disagree on what is the true or most meaningful level of inflation at any one time.

If this value of inflation is negative then it is often referred to as deflation.