Answer :
Final answer:
Inflation is the increase in general price levels, reducing the purchasing power of currency. It leads to higher prices, decreased value of money, and a rise in demand for foreign goods.
Explanation:
Inflation is a persistent increase in the general price level of goods and services in an economy over time, leading to a decrease in the purchasing power of currency.
When an economy experiences inflation, prices of goods and services rise, and the value of currency decreases, resulting in people being able to purchase fewer goods with the same amount of money.
Domestic goods become more expensive relative to foreign goods during inflation, leading to a current account deficit as demand for foreign goods rises.
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