When inflation occurs:
A) the prices of all goods and services rise.
B) the purchasing power of money rises.
C) incomes are falling.
D) the average price level rises.

Question

Quizplus · Accepted Answer

Inflation is defined as a general increase in the average price level of goods and services in an economy over a period of time. When inflation occurs, it means that, on average, the cost of goods and services is rising, which does not necessarily mean the prices of all goods and services are increasing, nor does it imply that purchasing power or incomes are falling in nominal terms.

When Inflation Occurs