It is all to know that the value of money is flexible which can never remain static due to changing in economic aspects of a nation. In fact, the value of money is influenced the entire economy of a nation. Because we know that money is the medium through which the goods and the services of an economy are measured, hence if any changes are occurred in the value of money than it will directly affect the economy of a nation. These changes may either give to raise Inflation or Deflation in an economy. If these changes are reduced the value of the money of a nation then the condition of ‘Inflation’ will arise in a nation. On the other hand, if these changes are enhanced the value of the money of a nation then it will arise the condition of ‘Deflation’ in a nation. Thus, it is clear that ‘Inflation’ is the state in which the value of money is falling i.e. price are rising of goods and services in an economy. And ‘Deflation’ is the state in which the value of money is growing i.e. price is falling of goods and services in an economy. In fact, inflation and deflation both are evils for economy of a nation because both lead imbalances in economy of a nation.
In simple way, Inflation may be described as a situation which rises due to mismatch of demand and supply of goods or services. For example if in a market the demand of ‘Dell Computers’ are ten but the company supplies only five products as compare to demand in the market. In that case the ten customers will compete with each-other for five products and they can ready to pay even more price over the MRP. This will make a way to raise ‘Inflation’ in an economy.
On the whole we can say that inflation refers to such condition of economy in which too much money chasing too few goods.