Final answer:
Inflation is the general rise in the level of prices in an economy, reducing the purchasing power of money.
Explanation:
Inflation is a general and ongoing rise in the level of prices in an entire economy, leading to a reduction in the purchasing power of money. It is characterized by a persistent increase in the general price level of goods and services over time.
When the overall price level rises, each unit of currency buys fewer goods and services, reflecting a loss of real value in the economy. Inflation does not refer to changes in relative prices but indicates a broad pressure for prices to rise across different markets.
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