Answer
The correct answer is option B.
Stagflation refers to the inflation despite declining unemployment.
Explanation
Stagflation is referred to as the stage of economy which is characterized by stagnant economic growth accompanied by high unemployment and inflation or price rise. It is bad situation in any economy as the prices keep rising in spite of slow economic growth in the economy.
Further Explanation
The stagflation further worsens the situation of the market as the prices keep rising with the fall in the demand in an economy to further bolster the prices in an already weak economic condition.
The Keynesian economic belief inspired economies to increase the supply of money in the market to promote economic growth and employment by spurring the demand in the market. However these beliefs were to be reconsidered as the United States observed an era of stagflation where with rise in prices he unemployment rose.
The government in the cases of stagflation thus increases the interest rates which in turns increases the cost of borrowing and controls the flow of money in the market to reduce the aggregate demand in the market. However this further causes the decline in the Gross Demand Production of the economy.
Learn More
Learn more about the stagflation in USA during 1970s: brainly.com/question/3948689 ; Answer by Dawly7
Learn more about the way of curbing stagflation: brainly.com/question/6774036 ; Answer by Celai
Keywords
Stagflation in USA, ways of curbing stagflation, stagflation in an economy, reasons of stagflation, what is stagflation.
