Stagflation occurs when the economy experiences:
A) low unemployment and low inflation.
B) high unemployment and rapid inflation.
C) low unemployment and rapid inflation.
D) high unemployment and low inflation.

Question

Quizplus · Accepted Answer

Stagflation is characterized by high unemployment and rapid inflation, a situation where the economy is not growing but prices of goods and services are rising. This combination is problematic because it combines the negative aspects of recession (high unemployment) with those of inflation (rising prices), making it difficult for policy makers to address both issues simultaneously.

Stagflation Occurs When the Economy Experiences