Which is the best definition of inflation?

• A. An increase in the production of goods and services.
• B. A sustained increase in the general price level of goods and services in an economy over time.
• C. A decrease in the unemployment rate.
• D. A rise in the value of money.

Answer: (B)

Verified step by step guidance

1. Understand that inflation is an economic concept related to changes in the price level over time.
2. Recognize that inflation specifically refers to a sustained increase, meaning prices rise continuously rather than temporarily.
3. Identify that inflation affects the general price level of goods and services across the entire economy, not just individual items.
4. Distinguish inflation from other economic terms such as increased production (which relates to economic growth), unemployment rate changes, or changes in the value of money (which can be related but are not definitions of inflation).
5. Conclude that the best definition of inflation is: a sustained increase in the general price level of goods and services in an economy over time.