ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -Unemployment increases during business cycle recessions and decreases during business cycle expansions (recoveries). Inflation decreases during recessions and increases during expansions (recoveries).

Detailed explanation-3: -Why Unemployment Rises During a Recession. Because a recession is a slowdown in economic activity and labor is a key economic input, along with capital, it is logical that unemployment would rise as output (what companies make and sell) declines as companies making less and selling less need fewer employees.

Detailed explanation-4: -What happens to inflation during a recession? Historically, when the economy has slowed, inflation appears to remain high. But as a recession sets in, inflation will begin to fall. This can occur after a quarter or two of economic contraction, said Samana.