Inflation is a rise in prices
 
 or a decrease in the purchasing power of money.
 
 While sometimes individual item prices may climb
 
 due to shortages or increased demand,
 
 inflation is generally measured
 
 across a wide range of goods and services.
 
 This increase or decrease in prices across this range
 
 is expressed as a percentage point.
 
 For example, since 1960,
 
 inflation has increased an average of 3.79% a year.
 
 That means that prices today
 
 are about 10 times higher than back then.
 
 What $1 would buy in 1960 now takes $10.
 
 Inflation by itself isn't necessarily a bad thing.
 
 If you own property or commodities, some level of inflation
 
 means that your goods are increasing in value.
 
 If you have a fixed-rate loan, inflation means you're paying
 
 the same amount of money each month
 
 but getting a higher value for it.
 
 Inflation can stimulate the economy
 
 by encouraging higher rates of spending,
 
 both in investments, as people seek higher gains
 
 than those yielded by inflation,
 
 and in general spending, as fears of greater inflation
 
 leads consumers to buy now rather than later.
 
 On the downside, consumers have to pay more
 
 for goods and services.
 
 And any money that is not invested
 
 in a high-yield savings vehicle
 
 is essentially losing value over time.
 
 Wages may not keep pace with inflation,
 
 leading to even further decreases in purchasing power.
 
 If not kept under control, inflation could skyrocket
 
 to the point where money essentially becomes worthless.
 
 The Federal Reserve, or the Fed,
 
 is tasked with controlling inflation.
 
 Typically, they do this by adjusting interest rates.
 
 If inflation is low, they lower interest rates
 
 to try to boost spending.
 
 If inflation is high, they raise interest rates
 
 to try to slow down the economy.
 
 Raising it too high too fast, however,
 
 can cause a recession.
 
 Generally, the Fed tries to keep inflation
 
 to an average of 2%.
 
 This is just high enough to keep the economy growing
 
 and prices stable.
 
 If you'd like to learn more
 
 about the Federal Reserve and how it works,
 
 check out their website at federalreserve.gov.