economics medium Fill in the Blank

The economic condition characterized by persistently high inflation combined with stagnant economic growth and high unemployment, which defies the traditional Phillips Curve trade-off, is known as ___.

  1. SPS (or Sanitary and Phytosanitary Measures)
  2. construction (or real estate / infrastructure)
  3. TRIMs (or Trade-Related Investment Measures)
  4. stagflation

Answer: stagflation

Stagflation (stagnation + inflation) presents a nightmare scenario for policymakers. Traditional tools fail: raising interest rates to fight inflation will worsen unemployment and kill growth, while lowering rates to spur growth will exacerbate the already high inflation. It is typically triggered by severe negative supply shocks, such as the 1970s oil embargoes, which simultaneously drive up costs and crush industrial output.

Topic Macroeconomics - Inflation
Exam Relevance UPSC Prelims, SSC CGL, Banking
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