How does Currency work ?

You will buy it at the higher price for a while until you can change your habits.

Inflation is when the value of money steadily declines over time. Once people expect that prices will rise, they are more likely to buy now, before prices go higher.

That increases demand, which tells producers they can safely pass on more costs.

They drive prices up more, and inflation becomes a self-fulfilling prophecy.

They drive prices up more, and inflation becomes a self-fulfilling prophecy.

That's why the Federal Reserve watches inflation like a hawk. It will reduce the money supply or raise interest rates to curb inflation. A healthy economy can sustain a core inflation rate of 2 percent.

Core inflation is the price of everything except food and gas prices, which are very volatile.

The Consumer Price Index is the most common measure of inflation.

Deflation is when the value of money increases. That sounds like a great thing, but it is worse for the economy than inflation.

Why? Think about what happened to the housing market from 2007 to 2011. That was massive deflation. Prices dropped more than 20 percent.

Many people could not sell their houses for what they owed on their mortgage.

Buyers were afraid that the price would drop right after they purchased it. No one knew when prices would turn back up.

True, the value of money increased. You received more house for the dollar in 2011 than in 2006. But families lost homes. Construction workers lost jobs. Builders went bankrupt. That's

what makes deflation so dangerous. It's a fear-driven downward spiral.