WBCS.LIVE practice question

Which economic term describes a situation of persistent high inflation combined with high unemployment and stagnant demand?

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

Answer options

  1. Deflation
  2. Hyperinflation
  3. Stagflation
  4. Recession

Correct answer and explanation

Correct answer: Stagflation

Explanation: āœ… Correct Answer: C) Stagflation šŸ“š Explanation: Stagflation is a rare and difficult economic condition where the economy experiences stagnant growth (stagnation) and rising prices (inflation) simultaneously. This contradicts the traditional economic view that inflation and unemployment usually move in opposite directions. It presents a major challenge for policymakers because actions to lower inflation may increase unemployment.