Inflation
Recently, my neighbor got a new central air conditioning unit installed. It cost him over $8,000!!! I had a unit put in ten years ago and it only cost me $3,000. It’s a good example of inflation. In ten years, the cost for a central air unit went up by $5,000!!! Yes, I’m aware that his unit might be a different size than mine, but still…. that’s a significant difference.
This is a perfect example of inflation. In economics, inflation is defined as prices increasing over time as the purchasing power of your money is reduced. So, one dollar today buys less than it did ten, five, or even one year ago.
On the other hand, eggs are coming down in price from their peak. That’s an example of deflation. When deflation happens, your buying power increases.