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Question

What are the factors that contribute to ldquo;Stagflationrdquo;?

I. High Prices

II. High spending

III. High inflation

IV. Low Economic growth

V. Low unemployment

Select the correct answer using the codes given below:

A I, II and III Correct Answer Incorrect Answer
B I, III and IV Correct Answer Incorrect Answer
C IV and V Correct Answer Incorrect Answer
D II, III and IV Correct Answer Incorrect Answer
E All of the above Correct Answer Incorrect Answer

Solution

Stagflation is characterized by slow economic growth and relatively high unemployment or economic stagnation which is at the same time accompanied by rising prices (inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP). The idea became popular during the 1970s when the U.S. economy witnessed high price inflation due to the oil shock as well as an economic recession marked by negative economic growth.

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