What economic factor is characterized by an overall increase in prices and a decrease in purchasing power?

The economic factor characterized by an overall increase in prices and a decrease in purchasing power is inflation. Inflation occurs when the prices of goods and services rise over time, which effectively erodes the purchasing power of money. As prices increase, consumers need to spend more to acquire the same goods and services they could buy for less in the past. This phenomenon can stem from various factors, including increased demand for products and services, rising production costs, or expansionary monetary policies.

In contrast, deflation refers to a decrease in overall price levels, stagnation is typically associated with slow economic growth and high unemployment without inflation, and a recession is characterized by a period of economic decline, usually accompanied by falling GDP and increased unemployment. Understanding these concepts is crucial in the study of economics and marketing, as it allows businesses to make informed decisions regarding pricing strategies, product offerings, and overall market positioning.