Stagflation can result
A) from an increase in the price of foreign-produced inputs.
B) from a fall in aggregate demand.
C) whenever an economy has completely flexible money wages and prices.
D) from a rightward shift of the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

Stagflation occurs when an economy experiences stagnant growth (or recession) and high inflation simultaneously. An increase in the price of foreign-produced inputs can lead to higher production costs domestically, which can contribute to inflation. At the same time, if these higher costs reduce overall spending and investment due to increased prices, economic growth can stagnate, leading to stagflation.

Stagflation Can Result