What economic condition is characterized by rising prices and reduced value of money?

The economic condition characterized by rising prices and a reduced value of money is known as inflation. When inflation occurs, the general price level of goods and services increases over time, leading consumers to spend more money for the same items compared to previous periods. This means that the purchasing power of a currency diminishes, effectively reducing its value. Inflation can often be driven by various factors, such as increased production costs, demand outpacing supply, or even expansionary monetary policies where more money is circulated in the economy.

In contrast, deflation refers to a decline in prices and an increase in the value of money, while a recession is a significant decline in economic activity across the economy that often leads to reduced consumer spending and investment. Stagnation, on the other hand, describes a period of slow economic growth, where there is little to no improvement in employment or production. However, it does not necessarily indicate rising prices as inflation does. Understanding inflation is crucial for recognizing how it can impact consumers and businesses in the economy.