A sustained decrease in the general price level is known as what?

• A. Deflation
• B. Inflation
• C. Hyperinflation
• D. Stagflation

Answer: (A)

Deflation is a sustained decrease in the general price level, meaning prices across the economy fall over time and money gains purchasing power. This differs from inflation, where prices rise; hyperinflation, which is an extreme and rapid inflation; and stagflation, where inflation occurs alongside stagnant growth and higher unemployment. So the term that best fits a persistent fall in prices is deflation.