Stagflation is the combination of
A) deflation and recession.
B) inflation and increasing real GDP.
C) deflation with increasing real GDP.
D) inflation and recession.

Question

Quizplus · Accepted Answer

Stagflation is a combination of inflation and recession, where the economy experiences rising prices (inflation) with stagnant or declining economic growth (recession). It is often caused by supply-side shocks, such as a decrease in the supply of oil, which leads to higher prices and reduced economic activity. Option A and C are incorrect as they do not involve inflation, and option B is incorrect as increasing real GDP is not part of stagflation.

Stagflation Is the Combination of