Inflation refers to the general rising of prices for goods and services in the economy, due to an increase in the amount of money and/or credit available. When it occurs, the purchasing power of your dollar falls.
For novice investors, the P/E Ratio provides a useful numeric representation of the value between the stock price and earnings. However, the price to earnings ratio is a useful tool but certainly not the holy grail of investing as it is sometimes made out to be. Read this article to learn the formula, see an example, and a description for how to use the P/E Ratio.