The term stagflation refers to a situation where
(A) growth has no relation with the change in prices
(B) rate of growth and prices both are decreasing
(C) rate of growth in faster than the rate of price increase
(D) rate of growth is slower than the rate of price increase
Correct Answer : rate of growth is slower than the rate of price increase
Question Asked : SSC Tax Assistant (Income Tax & Central Excise) Exam 2009
Explanation : In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.
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