Infla

Infla is a term used in some economic models and teaching materials to denote a simplified abstraction of inflation. It refers to the rate at which a general price level increases in a hypothetical economy over a given period.

In practice, infla is represented by a price index P_t and is computed as infla_t = ((P_t / P_{t-1}) - 1) * 100, expressed as a percentage.

Use and purpose: used in macroeconomic simulations to examine how inflation interacts with monetary policy and real activity; can be exogenous or determined by rule.

Relation to other concepts: infla is closely related to inflation but is distinguished as a modeling construct; Not to be confused with price stability, indexation, or actual measured inflation.

Limitations: oversimplification; assumes homogeneous price changes and ignores distributional effects; the choice of base year or index can affect observed infla values.

See also inflation, price index, macroeconomic model, monetary policy.

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