Question

Stagflation arises due to ________.

• A. lower rate of growth
• B. general price rise
• C. both
• D. none

Answer 1

The correct option is C both

Stagflation is an economic situation where the economy experiences the combination of inflation and stagnation. In this kind of situation the economy experiences unemployment with rise in the general price level. This kind of situation worsen economic condition as their is no benefit or growth in the economy and on the other hand there is increase in the general price level. Therefore, stagnation arises due to lower rate of growth and persistent rise in the general price level.