The term "stagflation" refers to the situation when
A) real GDP and the price level both rise because of an increase in aggregate demand.
B) prices become stagnant and do not increase or decrease.
C) the short- run aggregate supply curve and the aggregate demand curve shift in opposite directions.
D) the aggregate supply curve shifts leftward, prices increase and real GDP decreases.

Question

Quizplus · Accepted Answer

Stagflation occurs when the economy experiences stagnant growth (or a decline in real GDP) and high inflation simultaneously, typically due to a leftward shift in the aggregate supply curve.

The Term "Stagflation" Refers to the Situation When