Use the following to answer questions .
Exhibit: AD-AS and the Inflation-Unemployment Cycle
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from
A) point 1 to point 2 is representative of a recovery phase.
B) point 3 to point 4 is representative of a stagflation phase.
C) point 3 to point 2 is representative of a recovery phase.
D) point 4 to point 3 is representative of a Phillips phase.

Question

Use the following to answer questions .
Exhibit: AD-AS and the Inflation-Unemployment Cycle 
-(Exhibit: AD-AS and the Inflation-Unemployment Cycle) The movement from
A) point 1 to point 2 is representative of a recovery phase. 
B) point 3 to point 4 is representative of a stagflation phase. 
C) point 3 to point 2 is representative of a recovery phase. 
D) point 4 to point 3 is representative of a Phillips phase.

Quizplus · Accepted Answer

The movement from point 3 to point 4 is representative of a stagflation phase, which is characterized by high inflation and high unemployment. This is because the AS curve shifts leftward, causing both price level and unemployment rate to increase.

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