Question : Inflation is defined as:
Option 1: A sustained increase in the general price level
Option 2: A sustained decrease in the general price level
Option 3: A temporary increase in the general price level
Option 4: A temporary decrease in the general price level
Correct Answer:
A sustained increase in the general price level
Solution : The correct answer is (a) A sustained increase in the general price level
Inflation refers to a persistent and sustained increase in the average price level of goods and services in an economy over time. It means that, on average, prices are rising, and the purchasing power of money decreases. Inflation is commonly measured using various price indices, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI).
Inflation can be caused by factors such as increased demand for goods and services, supply shocks, changes in production costs, or changes in the money supply. It is typically expressed as an annual percentage rate, indicating the rate at which prices are rising over a specific period.
