Stagflation is a situation in which an economy experiences
Correct answer: A. High inflation with high unemployment
- A. High inflation with high unemployment
- B. Low inflation with rapid expansion
- C. Falling prices with rising employment
- D. Stable prices with balanced growth
Explanation
Stagflation combines persistent inflation with weak economic activity and high unemployment. It creates a policy dilemma because measures that reduce inflation may further weaken employment and output.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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