In mainstream economics, the word “inflation” refers to a persistent rise in the general price level, as measured against a standard level of purchasing power. Due to the fact that different prices affect different people, there are many varying measures of inflation in use. The most well known are the CPI which measures the change in nominal consumer prices, and the GDP deflator, which measures inflation in new products and services created.
Mainstream economists' views of the causes of inflation can be broadly divided into two camps: the "monetarists" who believe that monetary effects dominate all others in setting the rate of inflation, and the "Keynesians" who believe that the interaction of money, interest and output dominate over other effects. Keynesians also tend to add a capital goods (or asset) price inflation to the standard measure of consumption goods inflation. Other theories, such as those of the Austrian school of economics, believe that inflation is caused by an increase in the supply of money by central banking authorities.
Related concepts include: deflation, a general falling level of prices; disinflation, the reduction of the rate of inflation; hyper-inflation, an out-of-control inflationary spiral; stagflation, a combination of inflation and rising unemployment; and reflation, which is an attempt to raise prices to counteract deflationary pressures.
In classical political economy, “inflation” means increasing the money supply, while “deflation” means decreasing it. The purpose of this increase in money supply is to accommodate any increase in real GDP. Some economists in a few schools of economic thought, generally described as libertarian, classical liberal, or ultra-conservative, still retain this usage. In mainstream economic terms these would be referred to as expansionary and contractionary monetary policies.