What term describes a period of slow economic growth and high unemployment combined with rising prices?

• A. Inflation
• B. Recession
• C. Stagflation
• D. Deflation

Answer: (C)

Stagflation is the period described here: the economy is growing slowly (or not at all) while unemployment is high and prices are rising. It’s a tricky combo because inflation often accompanies growth, and unemployment goes up in a downturn, but stagflation brings both high unemployment and rising prices at the same time. This term became famous in the 1970s after oil shocks pushed prices up even as the economy slowed, challenging typical ideas about how inflation and growth relate. Inflation means prices are rising, not necessarily that growth is slow. A recession means the economy is shrinking and unemployment is high, but prices don’t have to be rising. Deflation is about falling prices. In this description, the steady rise in prices alongside slow growth and job losses points to stagflation.