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Inflation

The gradual rise in prices that erodes the value of money.

Inflation is the rate at which the general price level rises over time, which means each dollar buys a little less than it did before. It is why money kept as idle cash slowly loses purchasing power, and why long-term savings usually need to earn a return above the inflation rate just to hold their value. A "real" return is the return after subtracting inflation.

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