Which of the following situations is an example of inflation?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → The prices of most goods and services keep rising month after month for two years.
Inflation is a sustained rise in the general price level. Both words must fit: prices of most goods must rise (general), and the rise must go on (sustained).
Option (1) The prices of most goods and services keep rising month after month for two years. — Correct. The rise is general and sustained.
Option (2) The price of petrol alone keeps rising month after month for a year, while other prices stay the same. — Incorrect. The rise lasts, but it is in one good only, not the general price level.
Option (3) The prices of most goods and services keep falling month after month for two years. — Incorrect. Prices are falling, which is the opposite of inflation.
Option (4) The price of onions doubles for two weeks after a flood, while other prices stay the same. — Incorrect. This rise is in one good and short-lived; it is neither general nor sustained.
NCERT (2026-27): Glossary: “Inflation – A sustained rise in the general price level.” “3.2 Background … Stabilisation measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. In simple words, this means that there was a need to maintain sufficient foreign exchange reserves and keep the rising prices under control. …” |