Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, the purchasing power of currency is falling. Inflation is measured by calculating the percentage increase in the Consumer Price Index (CPI) over time. A high inflation rate can be detrimental to the economy, as it erodes the value of money and reduces the purchasing power of consumers and businesses. Central banks often use monetary policy tools, such as interest rate adjustments, to manage inflation levels.