Which of the following will cause an increase in unemployment and inflation at the same time?
A)A rightward shift of aggregate supply.
B)A rightward shift of aggregate demand.
C)A leftward shift of aggregate supply.
D)A leftward shift of aggregate demand.

Question

Quizplus · Accepted Answer

A leftward shift of aggregate supply can cause both unemployment and inflation to increase simultaneously. This phenomenon is known as stagflation. It occurs because the decrease in aggregate supply leads to higher prices (inflation) and lower output, which can increase unemployment.

Which of the Following Will Cause an Increase in Unemployment