What financial term refers to a situation where prices generally rise, causing currency value to fall?

The term that describes a situation where prices generally rise, leading to a decrease in the purchasing power of currency, is inflation. Inflation occurs when demand outstrips supply, or when production costs increase, causing businesses to raise prices for goods and services. As prices increase, the same amount of currency can purchase fewer goods, effectively reducing its value.

Understanding inflation is crucial in personal finance because it impacts savings, investments, and overall purchasing power. When inflation is high, individuals may find that their earnings don't stretch as far as before, which can affect budgeting, spending habits, and long-term financial planning.

Deflation refers to a decrease in the general price level of goods and services, while stagnation implies a lack of growth in an economy, and economic growth indicates an increase in the production of goods and services within an economy. Each of these terms relates differently to economic conditions but does not accurately describe the phenomenon of rising prices and falling currency value as inflation does.