WBCS.LIVE practice question

Stagflation is a macroeconomic situation characterized by which of the following?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. High inflation combined with high economic growth.
  2. Low inflation combined with high unemployment.
  3. High inflation combined with high unemployment and stagnant growth.
  4. Deflation combined with rapid economic expansion.

Correct answer and explanation

Correct answer: High inflation combined with high unemployment and stagnant growth.

Explanation: āœ… Correct Answer: C) High inflation combined with high unemployment and stagnant growth. šŸ“š Explanation: Stagflation is a highly contradictory economic phenomenon where inflation rates are high while economic growth slows down and unemployment remains steadily high. It poses a severe dilemma for economic policymakers because actions designed to lower inflation often exacerbate unemployment. This term became widely prominent during the global oil crisis of the 1970s.