Question

Which of the following statements is true of inflation? Group of answer choices

a. It refers to a constant general price level in an economy.
b. It refers to a decrease in the general price level in an economy.
c. It refers to an increase in the average level of prices.
d. It refers to a rise in the price level of gasoline.

Answer 1

c. It refers to an increase in the average level of prices.

Step-by-step explanation:

Inflation refers to a constant increase in the average prices of goods and services in the economy over time. Inflation means consumers will pay more for a similar basket of goods and services than they did in a previous period. Economists use Inflation as a measure of the rate at which the general prices are rising.

A high rate of Inflation without a corresponding rise in incomes erodes the purchasing power of households and firms. The consumer price index CPI is the common index used to measure the inflation rate. Should the inflation rate increase at a very high rate, governments, through the central bank, applies monetary policies to regulate it.