Question

Which term is used to describe a situation where the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high?

• A. Recession
• B. Depreciation
• C. Stagflation
• D. Depression
• E. Running inflation

Answer 1

The correct option is C Stagflation

The term ‘stagflation’ is used in economics to describe a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment and vice versa.