Inflation is an increase in prices over time. The cost of products and services, such as food, housing, and healthcare, rises during periods of inflation. Therefore, an item that cost $1 in the 1920s might cost $19 today.   The negative effects of inflation include: As prices increase, purchasing power decreases. When inflation surges, each unit of currency is worth less than it was a few months ago. Even without changes to your lifestyle and purchases, your expenses increase