WBCS.LIVE practice question

Which economic term describes a situation where high inflation is 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. Disinflation
  3. Stagflation
  4. Hyperinflation

Correct answer and explanation

Correct answer: Stagflation

Explanation: āœ… Correct Answer: C) Stagflation šŸ“š Explanation: Stagflation is a highly toxic and contradictory macroeconomic situation characterized by stagnant economic growth, high unemployment rates, and simultaneously high inflation. It poses a massive challenge for central banks because standard monetary policies to lower inflation usually worsen unemployment, and vice versa.