WBCS.LIVE practice question

Inflation is

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. one time price level rise
  2. increasing profits in production
  3. increase in deficit financing
  4. continuous increase in price level

Correct answer and explanation

Correct answer: continuous increase in price level

Explanation: Inflation refers to a sustained and continuous rise in the general price level of goods and services in an economy over a period of time. A one-time increase in prices is not considered inflation. Persistent inflation reduces the purchasing power of money, affects savings, and can distort economic growth. It is usually measured by indices like the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Moderate inflation indicates growth, but high inflation can be harmful to the economy.