Asked by Kaylee Rabon on Jun 15, 2024
Verified
The term stagflation refers to:
A) a simultaneous reduction in output and the price level.
B) a simultaneous increase in output and the price level.
C) a decline in the price level accompanied by increases in real output and employment.
D) an increase in the price level accompanied by decreases in real output and employment.
E) a simultaneous increase in both the trade deficit and the budget deficit.
Stagflation
A situation in an economy where inflation is high, economic growth slows, and unemployment remains steadily high.
Price Level
The price level is a measure of the average prices of goods and services in the economy, indicating the purchasing power of money.
Real Output
Measure of economic output adjusted for price changes; refers to the quantity of goods and services produced in an economy.
- Understand the triggers of economic instability and the effectiveness of governmental responses in stabilizing these instabilities.
- Scrutinize the interplay between state regulations and economic metrics such as employment figures, inflation rates, and real gross domestic product.
Verified Answer
LJ
Lorie JacksonJun 21, 2024
Final Answer :
D
Explanation :
Stagflation is a macroeconomic situation where there is a combination of high inflation and stagnant economic growth, which leads to rising unemployment levels. This means that the price level is increasing (inflation) while real output (GDP) and employment are decreasing, which is described in choice D.
Learning Objectives
- Understand the triggers of economic instability and the effectiveness of governmental responses in stabilizing these instabilities.
- Scrutinize the interplay between state regulations and economic metrics such as employment figures, inflation rates, and real gross domestic product.