The correct answer is C. Inflation means erosion of money value.
Inflation is a general increase in prices and fall in the purchasing value of money. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money â a loss of real value in the medium of exchange and unit of account within the economy.
A. Inflation leads to rise in prices. This is correct because when the general price level rises, each unit of currency buys fewer goods and services.
B. Inflation means more purchasing power. This is incorrect because inflation means a loss of real value in the medium of exchange and unit of account within the economy.
D. Inflation plays havoc. This is correct because inflation can have a number of negative effects on an economy, including:
- It can make it difficult for businesses to plan and invest.
- It can lead to a decrease in the value of savings.
- It can make it difficult for people to afford basic necessities.
- It can lead to social unrest.