The average price of construction materials increased by 8.1 percent in 2005. The head of the Home Builders Association said it was due totally to increases in lumber, metal, and labor costs. The 8.1 percent increase is probably an example of:

The 8.1 percent increase is probably an example of inflation.

Explanation:

Inflation is referred to as an economic situation where there is a sustained increase in the general price level of goods and services in an economy over a period of time. Inflation reduces the purchasing power of each unit of currency where a unit of currency buys less than it did in prior periods. This leads to increases in the prices of goods and services over time.

The increase in cost of lumber, metal, and labor raised the average price of construction by 8.1 percent in 2005. This is probably an example of inflation.

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