What is meant by the term "stagflation"?
A)the combination of falling real GDP and a rising price level
B)a persistent inflationary gap
C)a persistent recessionary gap
D)the sluggish downward wage adjustment in response to a recessionary gap
E)the combination of inflation and rising real GDP

Question

Quizplus · Accepted Answer

Stagflation is a condition where there is a combination of high inflation and stagnant economic growth, usually measured by real GDP. It is characterized by a rising price level and falling output, which is the opposite of what is expected in a typical business cycle. This can occur when there is a supply shock, such as a sudden increase in oil prices, that causes both inflation and a decrease in real output.

What Is Meant by the Term "Stagflation