Economic growth is usually coupled with

Economic growth is typically coupled with inflation, which is a general increase in the price level of goods and services over a period of time. This connection between economic growth and inflation occurs because, during periods of economic expansion, there is usually an increase in consumer demand, business investments, and government spending. These factors put upward pressure on prices.

Why Inflation Happens with Economic Growth

Increased Consumer Demand:
When an economy grows, people have higher disposable incomes, leading to increased spending on goods and services. This heightened demand often outpaces supply, causing prices to rise.

Higher Input Costs:
With economic growth, industries expand, and demand for raw materials, labor, and energy increases. This can lead to higher production costs, which are often passed on to consumers in the form of higher prices.

Monetary Policy:
Central banks, to stimulate growth, may lower interest rates, making borrowing cheaper. Increased borrowing can lead to more spending and investment, further driving demand and inflation.

Wage Growth:
Economic growth typically results in lower unemployment rates. As the labor market tightens, wages rise, increasing household incomes. Higher wages increase purchasing power, contributing to inflation.

Why Other Options Are Incorrect

(a) Deflation:
Deflation refers to a decrease in the general price level of goods and services. It is usually associated with economic slowdown or recession rather than growth, as reduced demand leads to falling prices.

(c) Stagflation:
Stagflation is a condition where high inflation is coupled with stagnant economic growth and high unemployment. This is a rare and undesirable situation, unlike the normal inflation that accompanies economic growth.

(d) Hyperinflation:
Hyperinflation is an extremely rapid and uncontrollable increase in prices, often caused by a collapse in a country’s currency or economic system. It is not typical of standard economic growth but rather of economic crises.