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What is Inflation?

What exactly is inflation, and how does it affect your small business? In short, inflation reflects a reduction in the purchasing power of money – a loss of real value in the medium of exchange. In this article, we’ll explain what inflation is and how you can protect yourself from its effects. Let’s get started!

What is Economic Inflation?

Economic inflation is an increase in core prices and wages relative to a baseline level of prices and wages. The core inflation rate is the year-to-year change in the core index, which is calculated by the Bureau of Labor Statistics. This rate doesn’t include the volatile food and energy component prices so it tends to be a more accurate predictor of future inflation.

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