Which term describes a sustained rise in the overall price level across the economy?

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

Answer: (A)

Inflation is a sustained rise in the overall price level across the economy. That means, over time, the average prices of goods and services go up, so each unit of currency buys fewer goods. The price level is measured by broad indicators like the consumer price index or the GDP deflator, which track a wide basket of goods rather than the price of any single item. The key is that the rise is ongoing and widespread, not a one-time jump in a few prices. By contrast, deflation is a persistent fall in the general price level, stagnation is a period of little or no economic growth (often with unemployment), and hyperinflation is an extremely rapid, out-of-control price rise. So the term that fits the description is inflation.