Inflation and Interest Rates

Inflation is the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Inflation will cause the product price to increase for example: A chocolate bar costs $1, 20% inflation of the chocolate bar will make it cost $1.20. And the problem with higher prices is that there will be a less demand for it in which case customers will stop purchasing them.

Interest rate is the extra percentage of income that a lender charges the borrower within a time given. An example of that would be a lender gives $1000 with 1% interest per year, the person borrowing the money must return $1010 a year later.