Stagflation occurs when the
A) price level and real GDP are decreasing at the same time.
B) price level is increasing and real GDP is decreasing.
C) price level is decreasing and real GDP is increasing.
D) price level and real GDP are increasing at the same time.

Question

Quizplus · Accepted Answer

Stagflation is a situation in which the economy experiences high inflation rates and high unemployment rates simultaneously. This means that the general price level is increasing while the real GDP is decreasing or stagnant. Therefore, option (B) is the correct choice.

Stagflation Occurs When the