Inflation refers to the general increase in prices of goods and services over time.

When inflation rises:

• Purchasing power falls

• Money buys fewer goods and services

Moderate inflation is considered normal in a growing economy, while very high or very low inflation can create economic instability.

Inflation is measured using price indices.

• Consumer Price Index (CPI) measures changes in the prices paid by consumers.

• Harmonised Index of Consumer Prices (HICP) is used in the European Union to compare inflation across countries.

These indices track a basket of commonly purchased goods and services.

Gross Domestic Product (GDP) measures the total value of goods and services produced within an economy.

GDP is used to assess:

• Economic growth

• Living standards

• Overall economic performance

Changes in GDP help indicate whether an economy is expanding or contracting.

The unemployment rate shows the percentage of people who are actively seeking work but cannot find a job.

It reflects:

• Labor market conditions

• Economic strength

• Social stability

High unemployment often signals economic weakness, while low unemployment indicates strong labor demand.

The unemployment rate shows the percentage of people who are actively seeking work but cannot find a job.

It reflects:

• Labor market conditions

• Economic strength

• Social stability

High unemployment often signals economic weakness, while low unemployment indicates strong labor demand.

Economic indicators can be classified by timing.

• Leading indicators signal future economic trends (e.g. business confidence, new orders)

• Lagging indicators confirm past developments (e.g. unemployment, inflation)

Both types help analysts and policymakers assess economic conditions.