Which statement about inflation is correct?

Which statement about inflation is correct?

• A. A decrease in prices
• B. A sustained rise in the general price level of goods and services
• C. A change in the money supply
• D. An increase in production efficiency

Answer: (B)

Inflation is a sustained rise in the general price level of goods and services. Here, “general” means a broad increase across many items, not just one product, and “sustained” means it lasts over time rather than a short-lived spike. This is why the statement fits inflation: it describes a lasting increase in overall prices. While changes in the money supply can influence inflation, inflation itself is defined by rising price levels, not by money supply alone. An increase in production efficiency lowers costs and can reduce prices or boost output, which is opposite to inflation. A decrease in prices describes deflation, not inflation.

Inflation is a sustained rise in the general price level of goods and services. Here, “general” means a broad increase across many items, not just one product, and “sustained” means it lasts over time rather than a short-lived spike. This is why the statement fits inflation: it describes a lasting increase in overall prices.

While changes in the money supply can influence inflation, inflation itself is defined by rising price levels, not by money supply alone. An increase in production efficiency lowers costs and can reduce prices or boost output, which is opposite to inflation. A decrease in prices describes deflation, not inflation.