Define inflation.

• A. A decrease in prices over time
• B. A rapid fall in currency value
• C. The increase in wages without price changes
• D. A general increase in prices and the decrease in purchasing power of money

Answer: (D)

Inflation is a sustained increase in the overall price level of goods and services in an economy, which reduces the purchasing power of money. In other words, the same amount of money buys less over time because prices across many items rise together. It’s measured by price indices like the consumer price index. This differs from deflation (prices overall falling), currency depreciation (a fall in the value of money against other currencies), or a rise in wages without price changes (which would boost purchasing power, not cause inflation).