Inflation is defined as

• A. A decrease in the general price level
• B. A rise in the general level of prices
• C. A temporary price change of a single good
• D. A change in interest rates

Answer: (B)

Inflation is a rise in the general level of prices for goods and services over time. It means that, on average, what you can buy with a given amount of money costs more than before. This isn’t about the price of one item changing; it’s about the overall price level across many products and services.

Think of it as measuring how much the entire set of prices drifts upward, which is why economists use price indices like the Consumer Price Index to track it. A decrease in the general price level would be deflation, not inflation. A temporary price change for a single good doesn’t reflect inflation, since it doesn’t show a broad trend. A change in interest rates is a policy tool or market condition that can be affected by inflation, but it isn’t the definition of inflation itself.