Question

The term stagflation refers to a situation where __________.

• A. growth has no relation with the change in prices
• B. rate if growth and prices both are decreasing
• C. rate of growth is faster than the rate of price increase
• D. a period of time when there is high inflation and high unemployment

Answer 1

The correct option is D a period of time when there is high inflation and high unemployment

Stagflation is a situation when the rate of inflation is very high (ie, the average price level is rising rapidly) and the rate of unemployment is also very high. This is often illustrated through a Philips curve that has moved to the upper right of the diagram.