Inflation

What it means

A sustained rise in the general price level, reducing the purchasing power of money.

The exam angle

Distinguish demand-pull from cost-push: the policy response differs, and a central bank tightening into a supply shock is a recognised error.

Where it appears in the syllabus

• EconomicsCFA Level I · exam weight 6–9% · Market structures, business cycles, policy, trade and exchange rates.
• Foundations of Risk ManagementFRM Part I · exam weight 20% · Risk taxonomy, governance, CAPM, multifactor models, financial disasters.

Related terms

• Adverse selectionThe problem that arises when the party with better information self-selects into a transaction, leaving the…
• Monetary policyA central bank’s management of money supply and interest rates to pursue price stability and, in some mandates,…
• Moral hazardThe incentive to take more risk once someone else bears the consequences.
• Business cycleThe recurring pattern of expansion, peak, contraction and trough in economic activity.
• Core inflationInflation excluding food and energy prices, which are volatile and often driven by supply rather than demand.
• Fiscal policyGovernment use of spending and taxation to influence aggregate demand.