Price levels refer to the average prices of goods and services in an economy at a specific time. They are often measured using indices like the Consumer Price Index (CPI) or the Producer Price Index (PPI), which track changes in prices over time. Understanding price levels helps economists gauge inflation or deflation, which can impact purchasing power and economic stability. When price levels rise, it indicates inflation, meaning that money buys fewer goods and services. Conversely, falling price levels suggest deflation, where the value of money increases. Monitoring these levels is crucial for policymakers, businesses, and consumers to make informed financial decisions.