Stagflation is characterized by
A) a decrease in output and the price level.
B) an increase in the unemployment rate and an increase in the price level.
C) an economy which is growing at a rate equal to its historical average growth rate.
D) an increase in both output and the price level.

Question

Quizplus · Accepted Answer

Stagflation is characterized by a combination of high inflation and high unemployment, leading to a slowdown in economic growth. This is reflected in an increase in the price level (inflation) and an increase in the unemployment rate, as businesses cut back on production and hiring due to the high costs of inputs. Option A is incorrect as stagflation involves a decrease in output or slow growth. Option C is incorrect as stagflation is a deviation from the historical average growth rate. Option D is incorrect as stagflation implies high inflation and slow growth.

Stagflation Is Characterized by