Stagflation Occurs When Inflation ________ and GDP ________

question 237

Multiple Choice

Stagflation occurs when inflation ________ and GDP ________.

• A)rises; rises
• B)rises; falls
• C)falls; rises
• D)falls; falls

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Definitions:

Liquid Assets

Assets that can be quickly converted into cash with little to no loss in value.

Credit Available

The amount of credit that a financial institution extends to a client, which the client has not yet used.

Autonomous Consumption

The level of consumption spending that occurs when income is zero, reflecting expenditures that consumers must make even when they have no income.

Permanent Income Hypothesis

Formulated by Milton Friedman, it states that the strongest influence on consumption is one’s estimated lifetime income.