Stagflation is a period of time when the economy is experiencing:
A) inflation and low unemployment.
B) high unemployment and low levels of inflation at the same time.
C) high inflation and high unemployment at the same time.
D) low inflation and low unemployment at the same time.

Question

Quizplus · Accepted Answer

Stagflation refers to a situation where there is a high level of inflation and high unemployment at the same time. This is a particularly challenging economic situation as the standard policy responses to tackle inflation and unemployment tend to be at cross purposes. Inflation would typically be managed by raising interest rates, which might further exacerbate unemployment, while measures to increase employment (such as lowering interest rates) may fuel inflation.

Stagflation Is a Period of Time When the Economy Is