When the price level is rising and simultaneously real GDP is decreasing,
A) stagflation occurs.
B) the Fed has increased the discount rate.
C) there is an expansionary gap.
D) the natural unemployment rate increases.

Question

Quizplus · Accepted Answer

When the price level is rising and real GDP is decreasing, it is known as stagflation. This situation is characterized by a stagnant economy with high inflation.

When the Price Level Is Rising and Simultaneously Real GDP