What is "inflation"?

Inflation refers to the rate at which prices for goods and services in an economy rise over a period of time. This phenomenon indicates the declining purchasing power of money, meaning that as inflation increases, each unit of currency buys fewer goods and services. The focus on prices highlights the broader implications for consumers and businesses, as consistent price increases can affect budgeting, savings, and investment decisions.

While other concepts may relate to the economic scenario, they do not accurately define inflation. The increase in wages may or may not reflect inflation, as wage growth can occur independently of price increases. The reduction in the value of currency is a consequence of inflation but does not capture the essence of rising prices. Finally, the growth rate of an economy pertains to overall economic performance and can indicate a variety of factors, including inflation, rather than defining it. Therefore, option B stands out as the most accurate representation of inflation's fundamental definition.