Single correct option
Which term describes a sustained rise in the general price level in an economy?
- A. Inflation
- B. Deflation
- C. Stagflation only when output falls
- D. Devaluation
Show answer and solution
Answer: (A) Inflation
Inflation is a persistent increase in the general price level that lowers the purchasing power of money. Deflation is a fall in prices, and devaluation is a deliberate reduction in the official exchange rate of a currency under a fixed exchange rate regime. Stagflation combines high inflation with stagnant output, not a general term.
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