Stagflation is the simultaneous occurrence of both
A)A recession and deflation
B)A recession and inflation
C)Inflation and rapid growth in GDP
D)Recession and rapid growth in GDP

Question

Quizplus · Accepted Answer

Stagflation is a term used to describe the occurrence of both inflation and a recession in the economy. This is an unusual phenomenon because inflation and recession are typically seen as opposites. Inflation tends to occur when the economy is growing rapidly, while recessions typically lead to deflation or low inflation. Stagflation can occur when the economy experiences supply-side shocks, such as a sudden increase in oil prices or a decline in productivity, which lead to higher costs for businesses and lower output. As a result, prices rise, causing inflation, while the decrease in output leads to a recession. Therefore, choice B (a recession and inflation) is the best answer.

Stagflation Is the Simultaneous Occurrence of Both