Why is inflation bad and what causes it?

Most of us are painfully aware of inflation. Webster’s dictionary says, “inflation is a continuing increase in the general price level.” It is usually measured by using the Consumer Price Index (CPI), which is calculated and disseminated by the U.S. Bureau of Labor Statistics. If you would like to see monthly and annual data from 1913 to 2024, you can go their website.

 I’m not going to reproduce the whole thing here, but I’ll use some of the data as we go along. The base is set at 1982-84 = 100. We will also be interested in wage data, which is gathered and published by the Federal Reserve.

The CPI for January 2017 was 242.839 and the average wage was $26. By January 2021, the CPI stood at 261.582 and the average wage rate was $29.93. So the CPI increased by 7.72% and wages increased 15.12%.