Inflation

Definition : 

Inflation is a sustained increase in the average price of all goods and services produced in an economy. or It is a percentage change in the overall price levels between two periods measured by a price index.

Impact : 

Money loses purchasing power during inflationary periods.

Types :

Long Term : When the money supply grows at a faster rate than the output of goods and service. This is often described as " too much money chasing too few goods."

Short Term : It can result from various shocks to the economy like food pricing, currency pricing etc. shocks are common example.

Calculation :

If we have the WPI values of two time zones, say, beginning and the end of the year, the inflation rate for the year will be :
[{(WPI of the end of year - WPI of the beginning of the year)/WPI of beginning of the year}*100]
Since WPI figures are available every week, inflation for a particular week is calculated based on the above method. This is how we get inflation rates in India.