Stagflation is usually caused by a _____ shock.
A) negative demand
B) positive supply
C) negative supply
D) positive demand

Question

Quizplus · Accepted Answer

Stagflation is a situation where there is simultaneously high inflation and high unemployment. This is typically caused by a negative supply shock, such as a natural disaster, an increase in oil prices, or a reduction in productivity. A negative supply shock reduces the supply of goods and services, leading to higher prices, but it also reduces the demand for labor, leading to higher unemployment. This combination of high inflation and high unemployment is what defines stagflation.

Stagflation Is Usually Caused by a _____ Shock