What is defined as a general increase in prices and a decline in the purchasing value of money?

The correct choice is identified as inflation, which refers to a general increase in prices and a decline in the purchasing power of money. When inflation occurs, the overall level of prices for goods and services rises while the value of currency decreases, meaning that consumers can buy less with the same amount of money over time.

Inflation can occur for various reasons, such as increased demand for goods and services, rising production costs, or expansionary monetary policy. It is typically measured by indices such as the Consumer Price Index (CPI), which tracks changes in the price level of a basket of consumer goods and services.

Understanding inflation is crucial because it impacts economic decisions, including consumer spending, investment, and monetary policy. Maintaining a moderate level of inflation is often seen as a sign of a growing economy, but uncontrolled inflation can lead to significant economic problems.