What does stagflation refer to?
A) a simultaneous reduction in output and the price level
B) a simultaneous increase in output and the price level
C) a decline in the price level accompanied by increases in real output and employment
D) an increase in the price level accompanied by decreases in real output and employment

Question

What does stagflation refer to?  
A) a simultaneous reduction in output and the price level 
B) a simultaneous increase in output and the price level 
C) a decline in the price level accompanied by increases in real output and employment 
D) an increase in the price level accompanied by decreases in real output and employment

Quizplus · Accepted Answer

Stagflation refers to a situation where there is an increase in the price level (inflation) accompanied by a decrease in real output (recession) and employment. It is a combination of stagnation and inflation. Thus option D is correct.

What Does Stagflation Refer To