Final answer:
Stagflation is the term used to describe a decline in real GDP combined with a rise in the price level, characterized by slow economic growth and high inflation. The correct option is a. stagflation
Step-by-step explanation:
A decline in real GDP combined with a rise in the price level is known as stagflation. Stagflation is a portmanteau of stagnation and inflation and represents a situation where the economic growth rate is slow (or negative, as in a decline in real GDP), and at the same time, inflation is high.
This situation contrasts with a normal business cycle, where a decline in real GDP (also called a recession) is usually accompanied by lower inflation rates due to reduced demand for goods and services.
However, in stagflation, despite the economic slump, prices continue to rise, complicating economic policy since measures to reduce inflation may exacerbate unemployment, and measures to reduce unemployment may worsen inflation. The correct option is a. stagflation