Inflation is one of the most important, and most examined, concepts in A-Level Economics. It affects households buying everyday goods, businesses setting prices and wages, governments planning budgets and central banks making interest rate decisions. If you understand inflation properly, you unlock huge parts of macroeconomics, including monetary policy, economic growth, unemployment, living standards and inequality.

For GCSE and A-Level students, inflation is not just a definition to memorise. You are expected to:

• Explain why inflation happens
• Analyse its impact on different groups
• Evaluate whether it is always a problem
• Understand how governments and central banks respond
• Apply inflation to real-world contexts and data

This guide is designed to demystify inflation and turn it into a scoring opportunity in exams. We’ll explore:

• What inflation really is
• The main types and causes of inflation
• The effects on consumers, workers, firms, and governments
• How inflation is measured
• How inflation works in a global economy
• How policymakers control and manage inflation
• How to write top-level exam answers on it