Q. Consider the following statements:
1.Reflation refers to government efforts to boost demand and reduce unemployment through higher spending, tax cuts, or interest rate reductions.
2.Stagflation is a situation where high inflation and high unemployment exist together, often with low economic growth.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation:
- Reflation is a deliberate government policy to revive a sluggish or recession-hit economy by increasing public spending, cutting taxes, or reducing interest rates, even if it temporarily raises inflation.
- Stagflation is an unusual economic condition where inflation and unemployment are both high, along with low or stagnant growth, contradicting the Phillips Curve. It was first observed in the 1970s in the US due to oil shocks.
Source: Indian economy (Dr.Ramesh Singh)
