Understanding Inflation: The Rate of Change Matters

Inflation signifies the overall rise in the general price level across the economy, rather than specific increases in isolated sectors like housing. This phenomenon reflects all prices going up simultaneously. Economists focus on the rate of change in price growth, often described as the 'surface tension' of inflation, rather than the absolute prices themselves. A practical example highlights how a once $30 meal can rise to $45, illustrating that while the price has increased, the relevant measure is how quickly these changes occur. Ultimately, inflation discussions revolve around the dynamics of price increases rather than the static price levels.