Final answer:
The statement is true; inflation is fundamentally a monetary phenomenon in the long run, related to the increase in the money supply which leads to a general rise in prices across an economy.
Step-by-step explanation:
The statement that inflation is always a monetary phenomenon in the long-run is A. True. Inflation is fundamentally related to increases in the money supply over the long term. This concept is based on the quantity theory of money, which suggests that when more money is available, prices tend to rise if the number of goods and services in the economy remains the same.
In simpler terms, inflation occurs when the amount of money in circulation increases faster than economic growth. While there are other short-term factors that can influence inflation, such as supply and demand shocks, central banks and economic theorists often focus on monetary policy and the supply of money as key determinants of inflation over the long run. Smaller economies might experience more volatile inflation due to international movements of capital and goods, but the underlying cause remains tied to monetary factors.
However, inflation is not merely about price changes; it is about a general and ongoing rise in the level of prices across an economy. It is different from a one-time increase in the price level, which could result from a supply-demand shift in the market. Ongoing inflation means consistent pressure for prices to rise in most markets within the economy.