Stagflation exists when prices
A)rise and unemployment falls.
B)rise and unemployment rises.
C)fall and unemployment rises.
D)fall and unemployment falls.

Question

Quizplus · Accepted Answer

Stagflation is a rare phenomenon in which there is both high inflation (i.e., prices are rising) and high unemployment. Option A is incorrect because it describes a situation of economic growth, which is not the case in stagflation. Option C is also incorrect because falling prices would typically be accompanied by lower unemployment (as companies can afford to hire more workers with lower costs). Option D is incorrect because falling unemployment would generally lead to higher inflation (as companies compete for a smaller pool of available workers by offering higher wages).

Stagflation Exists When Prices