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

Quizplus · Accepted Answer

Stagflation occurs when there is a combination of stagnant economic growth and high inflation. An inflationary gap, which occurs when the economy is producing above its potential and there is high demand for goods and services, can lead to higher prices and inflation. If left unchecked, this can eventually lead to a period of stagflation. The other options do not directly relate to the conditions necessary for stagflation to occur.

Which of the Following Situations Would Cause a Period of Stagflation