Inflation is an economic phenomenon that occurs when there is a sustained increase in the overall price levels of goods and services in an economy over a specific period of time. This increase causes money to lose its value, as more money is required to purchase the same quantity of goods and services. Economists measure inflation through various indices, such as the Consumer Price Index (CPI) and the Producer Price Index (PPI). Causes of inflation can include demand-pull factors, where demand outpaces supply, or cost-push factors, where the costs of production rise, such as due to increased wages or material costs. For instance, an annual inflation rate of 5% means that on average, prices are 5% higher compared to the previous year.