Correct Option (b):
Economic growth typically involves an increase in aggregate demand for goods and services. This rise in demand, if supply does not increase commensurately, can lead to demand-pull inflation. Moderate inflation is often considered a characteristic feature of an expanding economy, especially in developing nations, reflecting increased economic activity and consumer spending.
Incorrect Options:
- Deflation (a): This refers to a sustained decrease in the general price level. It is commonly associated with a contraction in economic activity, reduced aggregate demand, and often, an economic slowdown or recession.
- Stagflation (c): This is a condition characterized by stagnant economic growth, high unemployment, and high inflation. It represents a situation where an economy experiences both inflation and recession simultaneously, which is contrary to typical economic growth.
- Hyperinflation (d): This denotes extremely rapid and out-of-control price increases. It is a severe form of inflation, usually indicative of a deep economic crisis, political instability, or a complete loss of confidence in a currency, rather than healthy economic growth.