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Rising prices, across the board. The purchasing power of a unit of currency falls as a result of inflation. For example, if the inflation rate is 2%, then a pack of gum that costs RM1 in a given year will cost RM1.02 the next year.

Inflation usually refers to consumer prices, but it can also be applied to other prices (wholesale goods, wages, assets etc). It is usually expressed as an annual percentage rate of change on an index number. Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.