In the late 1970s, the U.S. economy entered a stagflation phase characterized by
A) unemployment below its natural rate and rising inflation
B) unemployment above its natural rate and rising inflation.
C) unemployment at its natural rate and rising inflation.
D) unemployment above its natural rate and constant inflation.

Question

Quizplus · Accepted Answer

Stagflation is characterized by a combination of high unemployment and inflation, with both rising at the same time. Option A is incorrect because it describes a situation of low unemployment and high inflation, which is the opposite of stagflation. Option C is incorrect because it describes a situation of natural rate of unemployment and high inflation, which again is not stagflation. Option D is incorrect because it describes a situation of high unemployment and constant inflation, which is not stagflation.

In the Late 1970s, the U