Inflation is defined as which of the following?

• A. A sudden drop in prices.
• B. A one-time price spike.
• C. A consistent increase in the general level of prices.
• D. A stable price level.

Answer: (C)

Inflation is a sustained, broad-based rise in prices across the economy over time. It means the general price level increases month after month, so money’s purchasing power falls if incomes don’t rise as fast. The other options describe different things: a sudden drop in prices is deflation, a one-time price spike is a temporary shock and not ongoing inflation, and a stable price level means no inflation at all. Inflation is typically measured by tracking changes in the overall price level, such as through the consumer price index.