Yesterday, Casey received a cable company ad for bundled TV, telephone, and Internet service that cost appreciably more than what she is currently paying. At the same time, she received a notice from her utility company that summer rates would be increasing. Her schoolbooks are costing almost twice what they cost last year, and yesterday, gasoline cost her 30 cents more per gallon than it did last week. As she ponders the situation, she can't help but wonder how prices could be rising when so many people have lost their jobs and are cutting back on expenditures. She is certain that this situation characterizes her economics professor's description of stagflation.

Question

Quizplus · Accepted Answer

Stagflation is a situation where there is a combination of high inflation and stagnant economic growth, which appears to be the case in this scenario of rising prices while people are cutting back on expenditures and losing their jobs. Therefore, Casey's observation is correct.

Yesterday, Casey Received a Cable Company Ad for Bundled TV