When an economy experiences a persistent rise in the general price level at the same time that overall economic activity is slowing down and growth is weak, this situation is referred to as which phenomenon?

Introduction / Context:
This question examines knowledge of macroeconomic terminology, particularly the special case where an economy faces rising prices and weak growth at the same time. Such situations are not captured well by simple ideas like inflation or recession alone. The term that describes this combination of slow growth and rising prices is very important in economic policy discussions and in the history of modern macroeconomics.

Given Data / Assumptions:

• The general price level in the economy is rising, so there is ongoing inflation.
• At the same time, economic activities are slowing down, indicating weak growth and often higher unemployment.
• We are asked to choose the correct macroeconomic term that describes this combination.

Concept / Approach:
Typical macroeconomic states include inflation, recession, deflation, depression, and stagflation. Inflation alone means rising prices but does not say anything about growth. Recession and depression refer to declines in output and employment but do not require high inflation. Stagflation is a special term that combines stagnation (weak or no growth, high unemployment) with inflation (rising prices). To answer the question, we match the description given to these standard definitions and identify which term clearly refers to rising prices along with slowing economic activity.

Step-by-Step Solution:
Step 1: Note that the question mentions a period of price rise, which indicates inflation is present. Step 2: The question also mentions that economic activities are slowing down, which means growth is weak and unemployment is likely higher. Step 3: Recession is a period of declining output and rising unemployment, but it usually does not require high inflation. Step 4: Deflation refers to a fall in the general price level, which is the opposite of what is described, so it cannot be correct. Step 5: Depression is a very severe, prolonged recession with deep declines in output and employment, but again it does not specifically describe price rises. Step 6: Stagflation by definition is a situation of stagnation combined with inflation, so it perfectly matches the description of rising prices and slowing activities.

Verification / Alternative check:
To verify, recall the historical example of stagflation in many economies during the 1970s when high oil prices contributed to both inflation and lower growth. Policymakers faced the difficulty of dealing with inflation without further hurting already weak output. This real world example fits the same pattern as the one described in the question. The combination of stagnation and inflation is precisely what economists call stagflation, reinforcing that this is the correct term here.

Why Other Options Are Wrong:
Option A, deflation, refers to a sustained fall in the general price level and is the opposite of price rise. Option C, recession, focuses on falling output and rising unemployment but does not require ongoing inflation. Option D, depression, is an extremely deep and prolonged recession and still does not specifically describe high inflation. Only option B, stagflation, captures both rising prices and slowing economic activity in one term.

Common Pitfalls:
Students may confuse stagflation with recession because both involve weak growth and unemployment. Another mistake is to focus only on inflation and ignore the stagnation side, leading to the choice of simple inflation instead of the special term. Some may also mix up deflation and stagflation because both words contain similar endings, but their meanings are opposite in terms of price movements. Always check both aspects mentioned in the question: if there is inflation plus stagnation, the term is stagflation.

Final Answer:
The situation described, with rising prices and slowing economic activity, is called Stagflation.