What is the main goal of monetary policy during periods of stagflation?
A. Increase inflation and employment
B. Balance inflation control with economic growth
C. Reduce exports
D. Raise wages across all industries
Answer (1)
The correct answer is B. Stagflation is a mix of high inflation and low economic growth, often with rising unemployment. Policymakers must balance efforts to control inflation without making the economy worse. If inflation is tackled too harshly, more people may lose jobs. The challenge is to find a policy mix—like gradually raising interest rates while supporting key sectors—to stabilize prices and help recovery.
