Consider the following passage It refers to a situation when the inflation rate is high the growth r...........

Indian Economy (Easy) Inflation

Consider the following passage: It refers to a situation when the inflation rate is high, the growth rate slows down, and

unemployment stays high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate

unemployment and vice versa. Which of the following type of inflation is being defined in the above passage?

Skewflation

Disinflation

Hyperinflation

Stagflation

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Explanation:

Stagflation is a blend of two words i.e. stagnation and inflation. It is used in economics when the inflation rate is high, the growth rate slows down, and unemployment stays high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment and vice versa.
Hence option (d) is the correct answer.
• Hyperinflation (> 1000%)- This is reserved for extreme forms of inflation – usually over 1,000% though there is no specific definition. Hyperinflation usually involves prices changing so fast, that it becomes a daily occurrence, and under hyperinflation, the value of money will rapidly decline.
• Skewflation means the skewness of inflation among different sectors of the economy - some goods and services are facing huge inflation, some none and some deflation.
• Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price level of goods and services in a nation's gross domestic product over time. It is the opposite of reflation.