ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -1. A peak is when business activity reaches a temporary maximum, unemployment is low, inflation high. 2. A recession is a decline in total output, unemployment rises and inflation falls. 3.

Detailed explanation-2: -Stagflation is an economic situation where the economy experiences the combination of inflation and stagnation. In this kind of situation the economy experiences unemployment with rise in the general price level.

Detailed explanation-3: -Stagflation is a situation in which the inflation rate is high, the economic growth rate slows and unemployment remains steadily high.

Detailed explanation-4: -Consider a recession, a period of low economic activity. With lower demand for goods and services, firms start laying off workers and at the same time refrain from raising prices. So unemployment rises and inflation falls during recessions.

Detailed explanation-5: -Through this graph of the Phillips Curve, it is quite evident that the inverse relationship between inflation and unemployment is a downward-sloping curve with inflation on the Y-axis and unemployment on the X-axis. In layman’s words, increasing inflation leads to decreasing unemployment and vice versa.