In the context of public finance, 'Deadweight Loss' refers to:
A. Loss due to inflation
B. Loss of economic efficiency due to market distortion
C. Loss due to natural disasters
D. Loss of foreign exchange
Answer: Option B
Solution (By JKSSB Mock Tests)
Deadweight loss is the loss of economic efficiency that occurs when the equilibrium quantity is not produced due to taxes, subsidies, monopolies or other market distortions.
Explanation:
Stagflation is a situation of simultaneous high inflation, high unemployment and stagnant or negative economic growth, posing a policy dilemma.
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