Macroeconomics, also known as Keynesianism, is a branch of economics that deals with the structure, behavior, performance, and decision making of an economy in the as a whole in microeconomic terms. Economists study aggregate 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 Shouldn't Be Banned"? Get an original essayIn economics, inflation, defined as the sustained increase in the general price level of services and goods produced in an economy during a particular period of time. This means that the value of money will decrease, that is, the loss of purchasing power per unit of money. The inflation rate is used as a primary measure of inflation where the percentage change in the price index over a period of time is calculated on an annual basis. Historical records of the inflation rate and consumer price index have been used by several economies to represent inflation data. Economies are able to compare the growth rate of one period to another. In the consumer price index, some of the factors used in determining inflation are:Fiscal imbalances. This type of imbalance can trigger faster money growth or a payments imbalance, thereby forcing the depreciation of the exchange rate and thus leading to an increase in inflation. Overheating of the economy. Inflation is caused by an activity variable such as the output gap in the economy. Cost shock. This category concerns the movement of prices of some sensitive goods in the economy. A good example is in the case of petrol, any alteration in the price leads to an aggregate change in the price level of all other raw materials (Griliches, 2010). The historical inflation rate primarily records information obtained from the CPI to aid in inflation decisions. future. Finally, inflation forecasting has been important in economies where it has been applied in the following ways: Through inflation forecasting, the government can know the appropriate time to offer inflation-indexed bonds to its investors. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay By analyzing market variables such as price, inflation forecasts will help improve the quality of surveys and will also improve understanding of the process of making forecasts in an economy. Finally, the Reserve Bank's household monetary forecast provides a sentiment measure of inflation expectations to inform the monetary policy process..