When the price level is rising and, simultaneously, real GDP is decreasing,
A)the natural unemployment rate is rising.
B)the natural unemployment rate is falling.
C)stagflation is occurring.
D)the economy is experiencing an expansionary gap.
E)potential GDP is decreasing.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is both high inflation and low economic growth, which is what is described in the scenario presented. This typically results in a difficult economic environment, as high inflation reduces purchasing power while low growth limits job opportunities and income.

When the Price Level Is Rising And, Simultaneously, Real GDP