C. 43 – 46 題 Inflation, a term that is ubiquitous in economics, refers to the rate at which the general level of prices for goods and services is increasing, resulting in the concurrent decline of the purchasing power of currency. Typically, inflation is expressed as a percentage increase over a specified period, usually one year. One of the main reasons for inflation is the escalation of the money supply. When the central bank creates more money, the money supply expands, leading to the devaluation of each unit of currency. The resultant effect is that as more money chases the same quantity of goods and services, prices escalate, which is known as the cost-push inflation. Another factor that drives inflation is the surge in the demand for goods and services. When demand supersedes supply, prices rise, a phenomenon referred to as demand-pull inflation. Inflation has profound effects on the economy. One of the most significant consequences is the reduction of the purchasing power of money. As prices increase, people require more money to buy the same amount of goods and services, leading to a decline in consumer confidence, sluggish economic growth, and elevated unemployment rates. Inflation also impacts interest rates. When inflation is high, the central bank raises interest rates to reduce the money supply and control inflation. This often leads to reduced borrowing and investment, thereby impeding economic growth. Furthermore, inflation can affect the exchange rate of a country’s currency. As inflation surges, the currency value declines, rendering exports cheaper and imports more expensive. Consequently, this can lead to a decrease in the trade balance, which can also impact economic growth. Central banks employ a variety of tools to combat inflation, including adjusting interest rates, controlling the money supply, and using fiscal policies such as taxation and government spending. However, taming inflation is a delicate balancing act, as measures taken to reduce inflation can also lead to a slowdown in economic growth.