On a graph showing the aggregate demand and aggregate supply curves,stagflation can be represented by a:
A)leftward shift of the aggregate supply curve.
B)rightward shift of the aggregate supply curve.
C)upward movement along the aggregate supply curve.
D)rightward shift of the aggregate demand curve.
E)upward movement along the aggregate demand curve.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a decrease in aggregate supply due to high inflation and reduced economic output. This results in a leftward shift of the aggregate supply curve as there is less supply available at each price level.

On a Graph Showing the Aggregate Demand and Aggregate Supply