Correct Answer: High inflation and high unemployment

Solution : The correct answer is (a) High inflation and high unemployment.

It is an economic condition where there is a combination of stagnant economic growth, high inflation rates, and high unemployment rates. This is considered to be a challenging scenario for policymakers because it deviates from the conventional belief that inflation and unemployment have an inverse relationship, known as the Phillips curve. Stagflation is often associated with supply-side shocks, such as significant increases in the prices of key commodities or disruptions in production.