alleryStart learning →What is inflation?
AA rise in the money supply held by the commercial banks
BA rise in the average of all prices of goods and services
CA rise in wages that is faster than the rise in productivity
DA rise in the output of goods and services within a nation
Answer & Solution
Correct answer: B. A rise in the average of all prices of goods and services
1. The third macroeconomic goal is to keep overall prices fairly steady.
2. Inflation is the situation in which the average of all prices of goods and services is rising.
3. Its higher prices reduce purchasing power, the value of what money can buy.
4. Growth in output and growth in the money supply can accompany inflation but neither is its definition.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 1 "Understanding Economic Systems and Business", section 1.4 Macroeconomics: The Big Picture_
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