What term describes a sustained increase in the general level of prices for goods and services?

The term that describes a sustained increase in the general level of prices for goods and services is inflation. Inflation reflects an overall rise in prices, meaning that the purchasing power of money decreases over time; it costs more to purchase the same goods and services. This concept is fundamental to understanding economic dynamics, such as how monetary policy and supply and demand influence the economy.

In periods of inflation, consumers may notice that it takes more money to buy everyday items compared to previous periods. This can lead to discussions about wage increases, cost of living adjustments, and the impact on savings and investments. Recognizing inflation is crucial for economic policy as well, as central banks may implement measures to control it and ensure economic stability.

Other terms, such as deflation, refer to a general decline in prices, while recession indicates a significant decline in economic activity. Stagflation combines stagnant economic growth with high inflation, which adds complexity to economic conditions. Understanding these distinctions helps in comprehending the overall economic environment and its implications for consumers and policymakers alike.