When does 'stagflation' occur?
A)when inflation rises and GDP falls
B)when inflation falls and GDP rises
C)when inflation rises and GDP rises
D)when inflation falls and GDP falls

Question

Quizplus · Accepted Answer

Stagflation is a situation where the economy is experiencing both high inflation and stagnation in economic growth. This means that inflation is rising, indicated by a decrease in purchasing power and goods becoming expensive, while GDP is falling, indicating a contraction in the economy. The combination of high inflation and low economic growth makes it difficult for policymakers to combat this situation as their usual tools for reducing inflation may further harm economic growth.

When Does 'Stagflation' Occur