What is inflation?

What is inflation?

• A. Calculated over 1 year; supply and demand imbalance
• B. A general decline in prices
• C. An increase in production costs only
• D. It is a measure of unemployment rate

Answer: (A)

Inflation is the general rise in prices for goods and services across the economy, which reduces how much you can buy with the same amount of money. It’s typically measured as the percentage change in a broad price index, like the consumer price index, over a period—most commonly year over year. The movement comes from imbalances between supply and demand: when demand outpaces supply or when production costs push up many prices, the overall price level increases. So inflation captures a sustained, economy-wide rise in prices rather than a single price change. The other statements don’t fit because a general price drop describes deflation, inflation isn’t defined by production costs alone, and inflation is not a measure of unemployment.

Inflation is the general rise in prices for goods and services across the economy, which reduces how much you can buy with the same amount of money. It’s typically measured as the percentage change in a broad price index, like the consumer price index, over a period—most commonly year over year. The movement comes from imbalances between supply and demand: when demand outpaces supply or when production costs push up many prices, the overall price level increases. So inflation captures a sustained, economy-wide rise in prices rather than a single price change. The other statements don’t fit because a general price drop describes deflation, inflation isn’t defined by production costs alone, and inflation is not a measure of unemployment.