What is defined as the general increase in prices of goods and services over time?

The term that describes the general increase in prices of goods and services over time is inflation. Inflation occurs when there is a sustained rise in the overall price level in an economy, which means that each unit of currency buys fewer goods and services than it did in the past. This phenomenon can be measured using various indices, such as the Consumer Price Index (CPI) or the Producer Price Index (PPI).

Inflation is often linked to an increase in the money supply, increased demand for goods and services, or rising production costs. It is considered a normal part of a growing economy, although excessive inflation can lead to economic instability and reduce purchasing power. Therefore, understanding inflation is crucial for both consumers and policymakers as it affects consumer behavior, investment decisions, and the overall economic environment.