Inflation is aAn average decrease in the price level bA change in relative prices of goods cAn increase in the average price level d

Analyzing the Options

1. Understanding Inflation:

   • Inflation refers to the overall rise in the price level of goods and services in an economy over a period of time.

2. Evaluating the Options:

   • Option a (An average decrease in the price level): This describes deflation, which is the opposite of inflation.
   • Option b (A change in relative prices of goods): This does not accurately represent inflation, as inflation pertains to general price movements rather than just relative changes.
   • Option c (An increase in the average price level): This is the correct definition of inflation. It implies that on average, prices across the economy for goods and services have risen.
   • Option d (Any other definition not listed): Not applicable since we have evaluated the given options.

Conclusion

The correct answer to the question "Inflation is" is:

c: An increase in the average price level.