A sustained increase in prices, causing a decrease in purchasing power?

• A. Purchasing Power
• B. Inflation
• C. Demand-Pull Inflation
• D. Monetary Inflation

Answer: (B)

Inflation is a sustained rise in the general price level. When prices keep climbing over time, the money you hold buys fewer goods and services, so purchasing power declines. That rise in prices and the resulting loss of purchasing power describes inflation itself. Purchasing power is the measure of what money can buy, so it’s the effect, not the process. Demand-pull inflation is one cause of inflation, and monetary inflation refers specifically to an increasing money supply, which can lead to inflation but isn’t the general phenomenon described.