The movements of real GDP and inflation during the 1973-1975 recession can be best explained by a
A)rightward shift of the aggregate demand curve.
B)leftward shift of the aggregate demand curve.
C)rightward shift of the aggregate supply curve.
D)leftward shift of the aggregate supply curve.

Question

Quizplus · Accepted Answer

During the 1973-1975 recession, the economy experienced stagflation, characterized by a combination of high inflation and stagnant economic growth. This phenomenon can be best explained by a leftward shift of the aggregate supply curve, which indicates a decrease in the total supply of goods and services at every price level, leading to higher prices (inflation) and lower output (recession).

The Movements of Real GDP and Inflation During the 1973-1975