How is inflation defined?

Inflation is defined as the rate at which prices for goods and services rise over a certain period, leading to a decrease in the purchasing power of money. When inflation occurs, it means that each unit of currency buys fewer goods and services than it did before. This concept is crucial for understanding economic conditions and influences decisions made by consumers, businesses, and policymakers.

The other options provided do not accurately capture the essence of inflation. The rise in wages addresses labor costs but doesn't necessarily correlate with the broad increase in prices. The increase in corporate profits may indicate a thriving business environment, but it does not directly relate to the general price level or its impact on purchasing power. Finally, while a decrease in government spending may affect the economy, it is not a direct measure or definition of inflation. Therefore, the most accurate representation of inflation is the one that focuses on the rising prices of goods and services.