A general rise in price of commodities is called:

Key Points

• Inflation refers to the general increase in the prices of goods and services in an economy over a period of time.
• It erodes the purchasing power of money, meaning a fixed amount of money buys fewer goods and services as prices rise.
• Inflation can be caused by factors such as increased demand, rising production costs, or expansionary monetary policies.
• Economists measure inflation using tools such as the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).

Important Points

• Types of Inflation:
  • Demand-Pull Inflation: Occurs when demand for goods and services exceeds supply.
  • Cost-Push Inflation: Results from rising production costs, such as wages and raw materials.
  • Hyperinflation: Extremely high and typically accelerating inflation.
• Impact of Inflation:
  • Positive: Moderate inflation can stimulate economic growth.
  • Negative: High inflation can lead to uncertainty and reduce investment.

Additional Information

• Deflation: Refers to a general decline in prices of goods and services, often associated with reduced consumer spending and economic downturns.
• Stability: Economic stability refers to a situation where the economy experiences steady growth, low unemployment, and controlled inflation, ensuring predictability for businesses and consumers.
• Deficit: An economic term that usually refers to a shortfall, such as a budget deficit (government spending exceeding revenue) or trade deficit (imports exceeding exports).