Understanding Hayek's Triangle.

Inflation, as defined as the general rise in prices (mainstream definition), is just an aggregation of different prices of a basket of goods and their change over time. When the government says “inflation is 3%,” what they mean is when we make a weighted average of all of these prices (CPI-U), it has risen 3% in the last year.

Here is the BLS’s website on the CPI:

http://www.bls.gov/bls/inflation.htm

The basic problem with this is that the price of goods do not rise uniformly, and different people are effected depending on which goods they buy.

I would recommend looking at the Mises Wiki:

https://wiki.freecapitalists.org/wiki/Inflation

I would also recommend reading Shostak’s articles on the topic of inflation (he has many more than this):

http://mises.org/daily/908

http://mises.org/daily/3018