Question

What is inflation?

a. An increase in the purchasing power of the dollar
b. A decrease in the purchasing power of the dollar
c. An increase in the purchasing power of foreign currency
d. A decrease in the purchasing power of foreign currency

Answer 1

Inflation is a situation where the price levels of goods rises over time relative to a previous point. In this situation the purchasing power of any currency is decreased  over time. Therefore, the best answer is B) a decrease in the purchasing power of the dollar and also D) of the foreign currency.