What term is used to describe an economic condition where there is a general rise in prices?

The term that describes an economic condition characterized by a general rise in prices is inflation. This phenomenon occurs when the overall price level of goods and services increases, leading to a decline in purchasing power. Essentially, as prices rise, each unit of currency buys fewer goods and services, which can affect various aspects of the economy, such as consumer behavior and investment strategies.

Inflation is often measured by indices like the Consumer Price Index (CPI), which tracks the change in prices of a basket of consumer goods and services over time. Various factors can contribute to inflation, including increased demand for products, increased production costs, and expansive monetary policies that result in a greater supply of money in the economy.

Understanding inflation is crucial for analyzing economic health and making informed decisions in finance and policy. It often affects interest rates, wages, and employment rates, making it a key indicator for economists and policymakers alike.