Stagflation is characterized macroeconomically by a simultaneous occurrence of:

The term stagflation combines stagnation and inflation. It is a situation in which output growth is weak or negative and unemployment is high, while prices continue to rise. It is generally caused by an adverse supply shock, which shifts the short-run aggregate supply curve to the left, as happened with the oil price shocks of the 1970s. The experience was a puzzle for the simple Phillips curve, which implied that inflation and unemployment move in opposite directions. Options (A), (B), (C) and (E) do not describe the combination of falling output and rising prices. Hence the correct option is (D).