Part of the normal aftermath of a period of excessive aggregate demand is
A)improvement in the quality of life.
B)reflation.
C)real GDP growth.
D)stagflation.
E)All of these responses are correct.

Question

Quizplus · Accepted Answer

Stagflation is a situation where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions designed to lower inflation may exacerbate unemployment, and vice versa. This condition can follow a period of excessive aggregate demand, as efforts to cool off an overheated economy can lead to stagnation combined with inflation.

Part of the Normal Aftermath of a Period of Excessive