Inflation is when the prices of things rise over time, so money doesn't buy as much as it used to. Imagine if a candy bar that costs one dollar today costs a dollar and ten cents next year: that's inflation at work. Your dollar hasn't changed, but it buys less candy.

Inflation happens when there's more money circulating in an economy, or when things become harder to produce or get hold of. During the 1970s, America experienced severe inflation: a gallon of gas that cost 36 cents in 1970 cost over a dollar by 1980. Families had to adjust their budgets because their paychecks bought less groceries, gas, and clothing than before.

Economists measure inflation by tracking how much typical purchases cost over time. A little bit of inflation (around 2-3% per year) is normal and even healthy for an economy. But when inflation rises quickly, it creates real problems: people who saved money find their savings buy less, workers need raises just to maintain their standard of living, and families struggle to afford basics.

The opposite of inflation is deflation, when prices actually fall. While falling prices might sound great, deflation can signal serious economic trouble and can lead to job losses and business closures.