The rise in prices of goods and services. Inflation is measured by the percentage of price increase. For example, a moderate rate of inflation, approximately 1 to 3 percent, is seen as healthy for an economy. When prices rise more than 3 percent, inflation can produce economic turmoil. People who donÂ’t have the ability to increase their income at the same rate as inflation, such as retirees or students, are particularly hurt. If inflation rises to excessively high levels, that is called hyperinflation. Inflation is caused by too many dollars chasing too few goods.