Refer to the information provided in Figure 27.4 below to answer the question(s) that follow. Figure 27.4
-Refer to Figure 27.4. If the economy is currently at the intersection of AS and AD, stagflation would be caused by
A) an increase in AS.
B) a decrease in AS.
C) an increase in AD.
D) a decrease in AD.

Question

Refer to the information provided in Figure 27.4 below to answer the question(s) that follow.  Figure 27.4
-Refer to Figure 27.4. If the economy is currently at the intersection of AS and AD, stagflation would be caused by
A) an increase in AS. 
B) a decrease in AS. 
C) an increase in AD. 
D) a decrease in AD.

Quizplus · Accepted Answer

Stagflation occurs when there is a decrease in AS (shift to the left) which causes both inflation (higher price level) and a decrease in real GDP (lower output). Therefore, choice B is the correct answer as it represents a decrease in AS.

Refer to the Information Provided in Figure 27