Macroeconomics, also called Keynesianism, is a branch of economics that deals with structure, behavior, performance, and decision making of an economy as a whole. Economists study overall indicators of the economy such as gross domestic product (GDP), price index, unemployment rates, inflation and other interrelationships that exist between different sectors of the economy ( Dwivedi, 2010). In our discussion, we will consider the historical sources of the inflation rate in the study of macroeconomics. Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”? Get an original essay In economics, inflation is defined as the sustained increase in the general level of prices of services and goods produced in an economy over a given period of time. This means that the value of money will decrease, i.e. the loss of purchasing power per unit of money. The inflation rate is used as the main measure of inflation, with the percentage change in the price index over a given period calculated on an annual basis. Historical records of inflation rate and consumer price index have been used by different economies to represent inflation data. Economies are able to compare the growth rate from one period to another. In the Consumer Price Index, some of the factors used to determine inflation are: Fiscal imbalances. These type of imbalances can either trigger faster growth of the currency or an imbalance in payments, thereby leading to a depreciation of the exchange rate, thereby leading to an increase in inflation. Overheating of the economy. Inflation is caused by an activity variable such as an output gap in the economy. Cost shocks. This category concerns the evolution of prices of certain sensitive goods in the economy. A good example is in the case of gasoline, any change in price results in an overall change in the price level of all other products (Griliches, 2010). The historical inflation rate mainly keeps records of the information obtained from the CPI to assist in decision making. future. Finally, inflation forecasts have played an important role in economies where they have been applied in the following ways: Through inflation forecasts, the government can know the appropriate time to offer inflation-indexed bonds to its investors . Keep in mind: this is just a sample. Get a personalized article now from our expert writers.Get a Custom EssayBy analyzing market variables such as price, inflation forecasting will help improve the quality of surveys and also improve the understanding of the forecast formulation process in an economy. Finally, the reserve banks' household monetary forecasts provide a measure of the sentiment of inflation expectations in order to feed into the monetary policy process...