Question

Read the scenario. The citizens of Country D have noticed that the average prices of most goods within their nation have begun to rise. At the same time, employers are not raising wages at the same rate. The combination of these challenges has resulted in a decrease in overall demand, causing a decline in GDP. According to the scenario, what is the greatest economic challenge that Country D is facing? unemployment stagflation high production high wages

Answer 1

Answer:

stagflation

Explanation:

This country is undergoing a process of stagflation, which is the combination of stagnation in economic activity and high inflation. The recipe for stagflation is exactly as described. Decrease in real wages caused by the inflation process and decrease in consumption because agents are becoming poorer and more fearful about the future.