Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What is stagnation in economic terms?

Rapid growth of the economy
No growth in the economy
A decrease in the labor supply
An increase in unemployment

The correct answer is: No growth in the economy

Stagnation in economic terms refers to a prolonged period during which an economy experiences little to no growth. This situation indicates that the output of goods and services is not increasing significantly over time, which can lead to various challenges, such as reduced investments and stagnant wage growth. While other conditions in the economy, such as a decrease in the labor supply or increased unemployment, might be associated with stagnation, they do not fully capture the essence of the term itself. Stagnation focuses specifically on the overall lack of growth, making it clear that the economy is not moving forward or improving. It can denote a standstill in economic activity, where GDP growth rates hover around zero for an extended duration, highlighting issues that may stem from inefficiencies or a lack of demand in the market.