In economics, inflation is defined as?

• A. A temporary rise in the general price level
• B. A persistent rise in the general price level
• C. A fall in the general price level
• D. A rise in the money supply without price change

Answer: (B)

Inflation is a sustained increase in the overall price level, meaning the average price of a broad basket of goods and services rises over time. It isn’t about a single price going up or a one-off spike; it’s about prices rising persistently across many items year after year.

That’s why the description of a persistent rise in the general price level is the best fit. A temporary price rise isn’t inflation because it doesn’t persist. A fall in the general price level is deflation. A rise in the money supply without an immediate price change describes a monetary change that hasn’t translated into higher prices yet, but inflation focuses on actual changes in the price level rather than money supply alone. In practice, inflation is measured by indices like the consumer price index or the GDP deflator, which track the average price level across the economy.