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Inflation is a persistent rise in the prices of goods and services. It can be caused by an increase in the money supply, by an increase in demand due to government spending or by a contraction in the supply of goods. Different types of inflation can be defined by their causes. Demand-pull inflation is caused by excessive demand in an economy, while cost-push inflation is caused by rising input costs. The achievement of a moderate rate of inflation is a primary goal of economic policy and central banks in many industrialised countries have been given policy independence in order to achieve it. Moderate inflation is common in many economies and can be regarded as relatively benign. If inflation falls to zero and an economy slips into deflation it can stunt economic growth.
See also: Hyperinflation, Stagflation