In macroeconomics, inflation is commonly described as a situation that can be summarised by which of the following phrases about money and goods in an economy?

Introduction / Context:
Inflation is one of the most important concepts in macroeconomics and everyday economic discussion. It refers to a sustained rise in the general price level of goods and services over time. A popular way to describe the essence of inflation is through a simple phrase that compares the amount of money in the economy to the amount of goods available. This question asks you to identify that widely used phrase, which captures the demand side view of inflation in intuitive terms.

Given Data / Assumptions:

• We are talking about inflation, that is, a general and sustained increase in prices.
• The options provide several phrases that relate money, goods, and people.
• We assume a basic understanding of supply and demand in determining prices.
• The famous phrase associated with inflation is used in many textbooks and speeches by economists.

Concept / Approach:
From a demand side perspective, inflation can be seen as a situation where aggregate demand in the economy outstrips aggregate supply at the existing price level. When there is too much purchasing power or money in the hands of consumers and investors relative to the available supply of goods and services, they bid up prices, leading to inflation. This idea is popularly summarised as too much money chasing too few goods. It does not mean that the number of people alone causes inflation, but rather the excess of monetary demand over real output.

Step-by-Step Solution:
Step 1: Focus on the fact that inflation involves rising prices due to demand being high relative to supply.Step 2: Identify the phrase that emphasises an excess of money (purchasing power) relative to goods (output).Step 3: The option that states too much money chasing too few goods captures this relationship directly.Step 4: Too little money chasing too many goods suggests weak demand and falling prices, which would be associated with deflation or disinflation, not inflation.Step 5: Options referring to too many people focus on population rather than the monetary side and do not directly express the inflation mechanism.Step 6: Therefore, the correct phrase for inflation is too much money chasing too few goods.

Verification / Alternative check:
In basic macroeconomic models, when the money supply grows faster than the real output of the economy, and if the velocity of money is reasonably stable, the result is upward pressure on the price level. Real life episodes of high inflation often coincide with rapid growth in money and credit relative to production. This supports the intuition behind the phrase too much money chasing too few goods. While there are also cost push and structural explanations of inflation, the demand pull view is accurately encapsulated in this widely quoted expression.

Why Other Options Are Wrong:
Too little money chasing too many goods: This describes a situation of abundant supply and weak demand, which would tend to lower prices rather than raise them.

Too many people chasing too few goods: Population pressure alone does not automatically cause inflation; what matters more is effective monetary demand.

Too many people chasing too little money: This refers to poverty or lack of purchasing power, and would not normally lead to rising prices across the board.

Too much credit and zero supply of goods: Zero supply is an extreme and unrealistic situation; even if supply is constrained, inflation is better understood as an imbalance between demand and available output, not literally zero goods.

Common Pitfalls:
Students sometimes confuse the number of people with the amount of money, assuming that more people automatically means more inflation. However, inflation is about purchasing power relative to output, not simply population size. Another mistake is to forget that the famous phrase refers to both money and goods; remembering both elements makes it easier to recall the correct option in exams.

Final Answer:
Inflation is often described as a situation of too much money chasing too few goods.