ECONOMICS (CBSE/UGC NET)

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ECONOMICS

GDP

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
If a nation’s GDP is declining and the inflation rate is 10 percent a year, than the country is most likely experiencing
A
an economic expansion
B
stagflation
C
an economic depression
D
a boom period
Explanation: 

Detailed explanation-1: -Stagflation is a period where economic growth stagnates, and inflation rises. This is characterized by high unemployment rates, rising prices and a decline in gross domestic product (GDP). For the typical consumer, stagflation causes their purchasing power to decrease, making it hard to meet basic needs.

Detailed explanation-2: -A sudden acceleration in the rate of rising prices is referred to as Running Inflation. When prices rise by more than 10% per annum, running inflation occurs.

Detailed explanation-3: -An increase in inflation means that prices have risen. With an increase in inflation, there is a decline in the purchasing power of money, which reduces consumption and therefore GDP decreases.

Detailed explanation-4: -Harsh regulation of markets, goods, and labor in an otherwise inflationary environment are cited as the possible cause of stagflation.

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