Which of the following situations would cause a period of stagflation at a later point in time?
A)a recessionary gap
B)a reduction in investment spending
C)an increase in technological development
D)an inflationary gap

Question

Which of the following situations would cause a period of stagflation at a later point in time?
A)a recessionary gap 
B)a reduction in investment spending 
C)an increase in technological development 
D)an inflationary gap

Quizplus · Accepted Answer

Stagflation occurs when there is a combination of high inflation and low economic growth. An inflationary gap occurs when the economy is producing above its potential, causing prices to rise. If this inflationary gap is not addressed and prices continue to rise, it could lead to stagflation in the future.

Which of the Following Situations Would Cause a Period of Stagflation