WBCS.LIVE practice question

What does the term 'Inflation' primarily indicate in an economy?

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

Answer options

  1. Increase in the purchasing power of money
  2. Decrease in the general price level of goods
  3. Sustained increase in the general price level of goods
  4. Increase in the value of the national currency

Correct answer and explanation

Correct answer: Sustained increase in the general price level of goods

Explanation: āœ… Correct Answer: C) Sustained increase in the general price level of goods šŸ“š Explanation: Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. When inflation occurs, each unit of currency buys fewer goods and services than it did in the previous period. Central banks like the RBI try to limit inflation to maintain economic stability and protect the value of the currency.