Which term describes rising prices across the economy?

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

Answer: (A)

Rising prices across the economy are described by inflation. Inflation means a sustained, generalized increase in the overall price level of goods and services, so money buys less over time. It’s measured with indexes such as the consumer price index (CPI) or the GDP deflator, which track price changes across many items rather than a single good. This concept stands apart from deflation, where prices fall broadly; stagnation, where growth is weak and unemployment may be high; and reflation, which refers to policy efforts to raise inflation back toward a healthier level after it has been too low. Inflation can arise from stronger demand, higher costs, or an increased money supply, but the defining point is that price increases are broad and persistent across the economy.