What term refers to the general increase in prices and fall in the purchasing value of money?

The term that refers to the general increase in prices and the fall in the purchasing value of money is inflation. Inflation occurs when the overall price level of goods and services rises, which means that each unit of currency buys fewer goods and services than before. This can happen due to an increase in the supply of money, higher demand for products, or increased production costs.

In the context of personal finance, understanding inflation is crucial because it affects purchasing power. As inflation rises, individuals may need to spend more money to maintain the same standard of living, which can impact budgeting and financial planning. Thus, recognizing and anticipating inflation can help consumers make informed decisions regarding saving, investing, and spending.

Deflation, on the other hand, refers to a decrease in prices, and depreciation typically refers to the loss of value of an asset over time. A recession is an economic decline characterized by falling GDP, which is not the same as inflation.