NISM Certifications · NISM-Series-XV: Research Analyst · Economic Analysis
Which of the following best describes stagflation?
Stagflation is a condition where economic growth stagnates and unemployment is high while inflation also remains high. It is hard to fight because policies that curb inflation can deepen the slowdown, and policies that boost growth can raise prices further.
- ARising output with falling prices
- BFalling output with falling prices
- CStagnant growth and high unemployment together with high inflationCorrect
- DRapid growth with very low inflation
Explanation
Stagflation combines weak growth and high unemployment with persistent high inflation, a situation difficult for policymakers because tackling one problem can worsen the other. The other options describe different conditions, such as deflation or a goldilocks economy.
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