Stagflation is the result of
A)An increase in aggregate demand.
B)An increase in aggregate supply.
C)A decrease in aggregate demand.
D)A decrease in aggregate supply.

Question

Quizplus · Accepted Answer

Stagflation is a phenomenon in which the economy experiences a combination of stagnant economic growth (low aggregate demand) and high inflation (decrease in aggregate supply). This can be caused by a decrease in aggregate supply due to higher input prices, such as oil prices, which results in cost-push inflation. Therefore, the best choice is D, a decrease in aggregate supply.

Stagflation Is the Result of