Stagflation occurs when high inflation combines with a.  high unemployment and a low level of production. b.  low unemployment and a high level of production. c.  a drop in buying power and a rise in workers’ wages. d.  a rise in buying power and a drop in workers’ wages.

The correct answer is A.

Stagflation (stagnation + inflation) is an economic scenario is which low economic growth and hight unemployment levels are combined with a inflation schedule and price inestability. To sum up, it is inflation combined with a decrease in the GDP (Gross Domestic Product).

It is a rare event and also tricky to solve for policymakers because commonly, policies which aim to decrease inflation push economic growth even further into stagnation or even negative figures.

Answering the question, stagflation occurs in any economy when high inflation combines with high unemployment and a low level of production. This implies the correct answer is A.

Stagnation can be defined as a condition in which there is a high rate of unemployment with slow economic growth accompanied by rising prices and inflation.

Stagnation can also described as a decline in a domestic gross product as a result of inflation. Any economy facing stagnation will experience inflation and a high rise in unemployment.

Stagnation can occur due to the following reasons

In any country, stagnation is accompanied by conditions that can create lots of problems for the government.

It can result in the following

Stagnation tends to develop huge problems for government authorities as most of their policies will be geared towards decreasing the effect of stagnation, which can greatly affect the unemployed people.

However, the type of policies put in place by the government to cushions the effect of stagnation can as well lead to a rise in the inflation rate.

The high unemployment rate would, in turn, result in a decline in the manner at which people spend money on goods and services. This will also result in a low level of the company’s production

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