An indication that there is inflation in a country is that

Step 1: Analyze the question The question asks for an indication (a sign) that inflation exists in a country.

Step 2: Explain the concept Inflation is a persistent, general rise in the price level of goods and services over time. Because prices rise, the purchasing power of money falls. In simple terms, "too much money chasing too few goods."

Step 3: Evaluate each option

• A. A decrease in the demand for goods and services: Wrong. Falling demand tends to push prices down (or cause deflation or recession), not up. Inflation is often linked with rising demand (demand-pull inflation).
• B. Too many goods in circulation: Wrong. An abundance of goods tends to lower prices. Inflation is associated with too much money relative to goods, or with goods being scarce.
• C. The same amount of money buys a lower quantity of goods: Correct. If prices are rising, ₦1,000 that used to buy 10 items now buys only 7 or 8. This is the fall in the purchasing power of money, the classic sign of inflation.
• D. People prefer to lend than to borrow: Wrong. During inflation, the real value of money owed falls, so borrowing becomes more attractive and lenders lose out. This option is the opposite of what we would expect.

Step 4: Answer

Step 5: Exam tip When you see "inflation" in an exam, think "prices up, money's value down." Any option that says money buys less is almost always the right one. Also remember that inflation is the opposite of deflation, where the same money buys more.