Q.

Stagflation refers to a situation which is characterized by -

A. stagnant employment and deflation
B. deflation and rising unemployment
C. inflation and rising employment.
D. inflation and rising unemployment
Answer» D. inflation and rising unemployment
Explanation: Stagflation describes a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.
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