The Economics of Money and Banking Chapter 11 Inflation and Deflation 》》 Concept of Inflation 1 Definition Inflation is a continuous and obvious rise of the price level caused by Overview of Inflation great increase of money supply and it reduces the purchasing power of each unit of a currency. Two Conditions ■Notes in circulation Followed by continued rise of general price level 3 GUO YING SEM TONGJI UNIVERSITYThe Economics of Money and Banking 3 GUO YING SEM TONGJI UNIVERSITY 1 Concept of Inflation Overview of Inflation Inflation is a continuous and obvious rise of the price level caused by great increase of money supply and it reduces the purchasing power of each unit of a currency. Definition Notes in circulation Followed by continued rise of general price level Two Conditions Chapter 11 Inflation and Deflation