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Inflation is
1. one time price level rise.
2. increasing profits in production.
3. increase in deficit financing.
4. continuous increase in price level.

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Correct Answer - Option 4 : continuous increase in price level.

The correct answer is a continuous increase in the price level.

  • The sustained rise in the prices over a period of time is known as Inflation.
  • Types of inflation based on the cause-
    • Demand-pull Inflation- When demand is greater than supply.
    • Cost-push Inflation- It is caused when there is a reduction in aggregate supply, this may be because of increased prices of inputs.
    • Structural Inflation-  It is caused due to operation of the structural weaknesses.
      • supply bottleneck, lack of infrastructure etc.
  • Types of inflation based on the rate of inflation-
    • Creeping Inflation- When the inflation rate is between 1% - 5%.
      • Manageable and inevitable in a growing economy.
    • Trotting Inflation -  When the inflation rate is between 5% - 10%.
      • ​If not controlled then may worsen into runaway inflation.
    • Hyper Inflation-  When the inflation rate exceeds 50% for a month.
      • Very high within a very short span of time.
  • The WPI is widely used to measure the rate of inflation.

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