Which is an effect of stagflation

trade with other economies increases

the value of a country's currency drops

prices for goods fall sharply and suddenly

the gdp rises along with production levels

The second answer is correct (B).

Stagflation is the worst case scenario that an economy can achieve. It is a conjunction between economic stagnation and inflation.

Inflation is the corrosion of the value of a country's currency and causes it to depreciate relative to other currencies.

Stagnation is the decline in economic activity at low and unwanted levels. Normally, when a process of economic stagnation occurs, prices fall. However, in a process of stagflation the economy is stagnant and inflated.

This type of situation occurs when there is a failure to conduct economic policy. We can see this in Brazil in 2015. The collapse in the conduct of fiscal policy has brought the country into recession, while the policy of artificial price control has caused inflation to soar. The country has experienced stagflation.

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