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Inflation is the rate at which the general level of prices for goods and services rises and, subsequently, purchasing power falls. Central banks attempt to stop severe inflation along with severe deflation in an attempt to keep the excessive growth of prices to a minimum. As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries' central banks will try to sustain an inflation rate of 2-3%.

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