What term describes the overall rise in prices of goods and services?

What term describes the overall rise in prices of goods and services?

• A. Recession
• B. Deflation
• C. Inflation
• D. Depression

Answer: (C)

The term that describes the overall rise in prices of goods and services is inflation. Inflation occurs when there is an increase in the general price level, meaning that the purchasing power of money decreases over time. This can be caused by various factors, such as increased demand for goods and services, rising production costs, or an expansion of the money supply in an economy. Inflation is measured using various indexes, the most common being the Consumer Price Index (CPI), which tracks the changes in prices that consumers pay for a basket of goods and services. A moderate level of inflation is often seen as a sign of a growing economy. However, when inflation rises too quickly or reaches very high levels, it can lead to economic instability and uncertainty, affecting consumers' ability to purchase goods and services. In contrast, recession refers to a period of economic decline characterized by reduced economic activity, while deflation describes a decrease in the general price level of goods and services, indicating an increase in purchasing power. Depression represents a more severe and prolonged downturn in economic activity than a recession. In this context, inflation is distinct as it specifically indicates rising prices, which directly influences economic behavior and policy decisions.

The term that describes the overall rise in prices of goods and services is inflation. Inflation occurs when there is an increase in the general price level, meaning that the purchasing power of money decreases over time. This can be caused by various factors, such as increased demand for goods and services, rising production costs, or an expansion of the money supply in an economy.

Inflation is measured using various indexes, the most common being the Consumer Price Index (CPI), which tracks the changes in prices that consumers pay for a basket of goods and services. A moderate level of inflation is often seen as a sign of a growing economy. However, when inflation rises too quickly or reaches very high levels, it can lead to economic instability and uncertainty, affecting consumers' ability to purchase goods and services.

In contrast, recession refers to a period of economic decline characterized by reduced economic activity, while deflation describes a decrease in the general price level of goods and services, indicating an increase in purchasing power. Depression represents a more severe and prolonged downturn in economic activity than a recession. In this context, inflation is distinct as it specifically indicates rising prices, which directly influences economic behavior and policy decisions.