In a stagflation situation,what happens to unemployment and the price level?
A)Unemployment decreases and the price level increases.
B)Unemployment increases and the price level increases.
C)Unemployment increases and the price level decreases.
D)Unemployment decreases and the price level decreases.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a combination of high inflation and stagnant economic growth or high unemployment. Thus, unemployment increases while the price level also increases. Option A and D are incorrect as they contradict the concept of stagflation. Option C is incorrect as it suggests that low economic growth or high unemployment leads to lower prices, which is not the case in stagflation.

In a Stagflation Situation,what Happens to Unemployment and the Price