69th BPSC Prelims (2023), question 119

📈 Economy

119. Which factors could potentially contribute to stagflation in the Indian economy? 1. High inflation from increased Govt spending 2. Decline in industrial production/growth 3. Decrease in aggregate demand/consumer spending 4. Currency appreciation reducing export competitiveness.

     1. Only 1 and 2
     2. Only 2 and 3
     3. Only 1, 3 and 4
     4. 1, 2, 3 and 4
     Show answer

     Answer: D — 1, 2, 3 and 4

     All four factors — inflationary pressure, falling output, weak demand, and export competitiveness loss — can jointly produce stagflation (high inflation + low growth).