Which characteristic indicates stability in an economy?

Stable prices are a key indicator of stability in an economy because they suggest a predictable environment for consumers and businesses to make decisions. When prices are stable, individuals can plan their purchases, and businesses can set long-term prices for their products, which promotes confidence in the economy. Stability in prices often reflects a balanced relationship between supply and demand, where economic forces are in equilibrium, allowing for sustainable growth.

In contrast, fluctuating price levels can create uncertainty, making it difficult for consumers and businesses to plan for the future. High unemployment rates typically indicate economic distress rather than stability, as they suggest that a significant portion of the labor force is unable to find work. High inflation rates can erode purchasing power and create instability, as consumers may adjust their spending habits in anticipation of further price increases. Therefore, stable prices serve as a foundational characteristic of a healthy and stable economy.