Inflation is a general increase in prices and falls in the purchasing value of money. Most economists use a basket of goods — a set of general products and its prices — to measure cost fluctuations. This basket of goods then can be used to calculate the Consumer Price Index (CPI), which measures inflation rates.

Banks use the money deposited on savings accounts to lend to borrowers, who pay interest on their loans. After paying for various costs, the banks pay money on savings deposits to attract new savers and keep the ones they have.

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