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Define inflation and distinguish a real concept from a nominal concept. State two important costs of inflation.

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Define inflation and distinguish a real concept from a nominal concept. State two important costs of inflation

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In economics, inflation is a change in some important measure of money which says either real or apparent value is falling. The three most obvious versions of this, each held by some economists to be "real" inflation, are for prices to rise compared to the currency in question, the overall value of that money to fall (perhaps compared to other currency), or for more of that money to be added to the economy.

source: http://en.wikipedia.org/wiki/Inflation

Distinguish a real concept from a nominal concept:

Generally a real variable, such as the real interest rate, is one where the effects of inflation have been factored in. A nominal variable is one where the effects of ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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