How should the relationship between the general price level and inflation be understood?
Answer and explanation
Correct answer: A sustained increase in the general price level is called inflation
Inflation is a sustained increase in the average or general price level of goods and services over time. It reduces the purchasing power of money when incomes do not rise proportionately. A rise in one product’s price alone is not necessarily inflation; the movement must be broad and persistent across the economy.
Frequently asked questions
What is the correct answer to this question?
A sustained increase in the general price level is called inflation
Why is this the correct answer?
Inflation is a sustained increase in the average or general price level of goods and services over time. It reduces the purchasing power of money when incomes do not rise proportionately. A rise in one product’s price alone is not necessarily inflation; the movement must be broad and persistent across the economy.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
