What does inflation mean?

• A. Prices decrease over time
• B. Prices stay the same
• C. Wages rise faster than prices
• D. Prices tend to increase over time

Answer: (D)

Inflation means the overall level of prices for goods and services is rising over time. It reflects a sustained upward trend in prices, not just a single item going up. As prices climb, the purchasing power of money falls—that same amount of money buys less than before unless incomes rise at least as fast. Inflation is typically measured with a price index like the consumer price index (CPI) and tracked year to year.

The idea that prices tend to increase over time best captures inflation. The other notions describe deflation (prices falling), price stability (no real change in prices), or focus on wages rather than the general price level, but they don’t define what inflation is.