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 point 3 to point 4 is consistent with which phase
Of the inflation-unemployment relationship?
A) Phillips phase because inflation is increasing while unemployment is falling
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate
C) stagflation phase because inflation and unemployment have risen
D) recovery phase because the inflationary gap has been eliminated

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 point 3 to point 4 is consistent with which phase
Of the inflation-unemployment relationship?
A) Phillips phase because inflation is increasing while unemployment is falling 
B) recovery phase because although inflation has risen, unemployment is closer to its natural rate 
C) stagflation phase because inflation and unemployment have risen 
D) recovery phase because the inflationary gap has been eliminated

Quizplus · Accepted Answer

The movement from point 3 to point 4, where both inflation and unemployment have risen, is indicative of the stagflation phase. Stagflation is characterized by the simultaneous occurrence of high inflation and high unemployment.

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