INFLATION IN INDIADEFINITIONS: "An increase in the quantity of money in circulation, leading to a relatively sharp and sudden fall in its value and a rise in prices: it may be caused by an increase in the volume of paper money issued or gold mined, or a relative increase in spending, as when the supply of goods fails to meet demand. This definition includes some of the basic economics of inflation and. seems to indicate that inflation is not defined as the increase in prices, but as the increase in the money supply which causes the increase in prices, i.e. inflation, is a cause rather than 'an effect. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available money and credit beyond the proportion of goods and services available. In this definition, inflation would appear as the consequence or result (rising prices) rather than the cause. A general and progressive increase in prices; “In inflation, everything becomes more valuable except money” CAUSES OF INFLATION: Inflation is caused by a combination of four factors. These factors are: The money supply increases. The supply of goods decreases. The demand for money decreases. Demand for goods increases IMPACT OF INFLATION: Inflation appears to be a chronic problem in many parts of the world. It is widely recognized that inflation leads to inefficient allocation of resources and therefore reduces potential economic growth. Inflation imposes a high cost on economies and societies; This disproportionately harms the poor and fixed-income groups, creates uncertainty across the economy, and undermines macroeconomic stability. High inflation has always hurt the poor more than the rich, because the poor are less able to protect themselves against the consequences and less able to protect themselves against the risks that high inflation poses. Reducing inflation therefore directly benefits low and fixed income groups. Economists view inflation more clearly as a “sustained rise in the general price level.” Their concerns focus on questions such as whether inflation distorts economic decisions. Very high inflation has a negative impact on economic performance, as studies carried out in several countries show. Similarly, moderate levels of inflation can distort investment and consumption decisions.1. ON OUR FUTURE PLANS: Inflation has an impact on our plans for the future. When you're saving for retirement, college, a home, or simply to budget for the next 12 months, the cost of goods and services has a direct impact on your goals..