Which of the following events is the most likely to create stagflation?
A) An increase in the money supply.
B) A reduction in the amount spent on national defense.
C) A doubling of oil prices.
D) A decrease in investment spending.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a combination of high inflation and low economic growth. Doubling of oil prices, as in choice C, can lead to a significant increase in production costs across many industries, resulting in higher prices and inflation. At the same time, this oil price shock can decrease economic growth, which creates a situation of stagflation. The other options, such as an increase in the money supply or a reduction in defense spending, are less likely to lead to stagflation.

Which of the Following Events Is the Most Likely to Create