What is the term for a sustained increase in the general price level of goods and services?

The correct answer is inflation, which refers to a sustained increase in the general price level of goods and services over time. This phenomenon can indicate a growing economy but can also lead to decreased purchasing power if wages do not keep pace with rising prices.

Inflation can result from various factors, including increased consumer demand, higher production costs, and expansionary monetary policies. It is crucial for economies to monitor inflation rates, as very high levels can lead to economic challenges, such as decreased savings and increased expenses for consumers.

Other terms like deflation indicate a decrease in the price levels, while stagnation refers to an economy that is not growing or declining and usually involves stagnant production coupled with high unemployment. Recession signifies a period of economic decline, typically characterized by a decrease in GDP, which may or may not involve inflation. Thus, inflation specifically captures the essence of a sustained increase in prices, making it the accurate choice in this context.