Stagflation occurs when the economy experiences both a
A)low exports and low imports.
B)rising price level and decreasing real GDP.
C)falling price level and decreasing real GDP.
D)falling price level and increasing real GDP.
E)rising price level and increasing real GDP.

Question

Quizplus · Accepted Answer

Stagflation is a situation where an economy experiences a combination of rising price levels and decreasing real GDP. It is characterized by high unemployment, high inflation, low economic growth, and low productivity. Option A is not correct because stagflation is not directly related to the performance of exports and imports. Option C is incorrect because falling price levels and decreasing real GDP refer to deflation and recession, respectively, not stagflation. Option D is not correct because stagflation cannot occur with falling price levels and increasing real GDP. Option E is also incorrect because stagflation occurs with rising price levels and decreasing real GDP, not rising price levels and increasing real GDP.

Stagflation Occurs When the Economy Experiences Both a