Question

What is inflation? a decrease in the overall price level an increase in the amount of money in circulation an increase in the overall price level an increase in the overall level of economic activity

Answer 1

The correct answer is increase in the overall price level.

Step-by-step explanation:

Inflation can be defined as the sustained increase in the general price level over a period of time. It causes the purchasing power of the currency to fall.

Inflation is generally classified into two types

1. Demand-pull, and
2. Cost-push

Inflation leads to a decline in disposable income. The inflation rate measures the rate of increase in the price level. Main tools to measure inflation are consumer price index, producer price index, wholesale index, etc.