Stagflation is a situation when
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- both unemployment and inflation are low
- both unemployment and inflation are high
- unemployment is high but inflation is low
- unemployment is low but inflation is high
The Correct Option is B
Solution and Explanation
Stagflation is an unusual economic condition characterized by stagnant growth (or recession), high unemployment, and simultaneously high inflation.
Step 2: Eliminate incorrect options.
- (A) Describes stable economy, not stagflation.
- (C) High unemployment but low inflation = deflationary recession, not stagflation.
- (D) Low unemployment but high inflation = booming economy with inflation, not stagflation.
Step 3: Correct option.
Only (B) fits: both unemployment and inflation are high.
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