BPSC – Combined Competitive Examination · Question 120
Which of the following factors could potentially contribute to stagflation in the Indian economy? 1. High inflationary pressure due to increased government spending 2. Decline in industrial production and sluggish economic growth 3. Decrease in aggregate demand and consumer spending 4. Appreciation of the domestic currency reducing export competitiveness
Show answer & explanation
Answer: (A) Only 1 and 2
Explanation
Stagflation combines high inflation with low growth and high unemployment; falling demand or a stronger currency push inflation down.
- (A) Correct
Correct: stagflation = high inflation (1) + stagnant growth (2).
- (B) Incorrect
Wrong: falling demand lowers inflation, which is not stagflation.
- (C) Incorrect
Wrong: 3 and 4 tend to reduce inflation.
- (D) Incorrect
Wrong: 3 and 4 are disinflationary.