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Which of the following statements is/are correct with reference to Stagflation?
Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment.
The occurrence of stagflation proves the theory behind the Philips curve.
Select the correct answer using the code given below.
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
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Which of the following statements is/are correct with reference to St...
- Stagflation was first recognized during the 1970s, where many developed economies experienced rapid inflation and high unemployment as a result of an oil shock.
- Stagflation refers to an economy that is experiencing a simultaneous increase in inflation and stagnation of economic output. It is a period of rising inflation and unemployment but falling output. Hence, statement 1 is correct.
- Stagflation is a combination of stagnant economic growth, high unemployment, and high inflation. This scenario, of course, directly contradicts the theory behind the Philips curve.
- Stagflation was long believed to be impossible because the economic theories that dominated academic and policy circles ruled it out of their models by construction. In particular, the economic theory of the Phillips Curve portrayed macroeconomic policy as a trade-off between unemployment and inflation.
- The theory claims that economic growth comes with inflation, which in turn should lead to more jobs and less unemployment. However, the concept has been somewhat disproven empirically due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment. Hence, statement 2 is not correct.
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Which of the following statements is/are correct with reference to St...
Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. It is a unique economic phenomenon characterized by a combination of stagnant economic growth, high inflation, and high unemployment. In this context, the given statements are as follows:
1. Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment.
This statement is correct. Stagflation occurs when an economy is facing both inflation and unemployment at the same time. Typically, inflation and unemployment have an inverse relationship, meaning that when one increases, the other decreases. However, in the case of stagflation, both inflation and unemployment rise together, leading to a challenging economic situation for policymakers.
2. The occurrence of stagflation proves the theory behind the Philips curve.
This statement is incorrect. The Philips curve is an economic concept that suggests a trade-off between inflation and unemployment. It posits that when unemployment is high, inflation is low, and vice versa. However, stagflation challenges this theory by presenting a situation where both inflation and unemployment are high. Stagflation became prominent in the 1970s when many economies experienced a combination of high inflation and high unemployment, contradicting the predictions of the Philips curve.
In conclusion, the correct statement is option 'A': 1 only. Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. However, the occurrence of stagflation challenges the theory behind the Philips curve, as it presents a situation where both inflation and unemployment are high.
1. Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment.
This statement is correct. Stagflation occurs when an economy is facing both inflation and unemployment at the same time. Typically, inflation and unemployment have an inverse relationship, meaning that when one increases, the other decreases. However, in the case of stagflation, both inflation and unemployment rise together, leading to a challenging economic situation for policymakers.
2. The occurrence of stagflation proves the theory behind the Philips curve.
This statement is incorrect. The Philips curve is an economic concept that suggests a trade-off between inflation and unemployment. It posits that when unemployment is high, inflation is low, and vice versa. However, stagflation challenges this theory by presenting a situation where both inflation and unemployment are high. Stagflation became prominent in the 1970s when many economies experienced a combination of high inflation and high unemployment, contradicting the predictions of the Philips curve.
In conclusion, the correct statement is option 'A': 1 only. Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. However, the occurrence of stagflation challenges the theory behind the Philips curve, as it presents a situation where both inflation and unemployment are high.
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Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements is/are correct with reference to Stagflation? Stagflation refers to a state of an economy that is experiencing a simultaneous increase in inflation and rising unemployment. The occurrence of stagflation proves the theory behind the Philips curve. Select the correct answer using the code given below.a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
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