Stagflation is often a result of
A)a negative supply shock.
B)a decrease in aggregate demand.
C)an increase in aggregate demand.
D)an increase in aggregate supply.
E)an increase in the long-run growth rate.

Question

Quizplus · Accepted Answer

Stagflation is a unique situation in which there is a combination of high inflation and low economic growth. This can happen when there is a negative supply shock, such as an increase in oil prices or a natural disaster that affects production. This reduces the aggregate supply in the market, leading to a decrease in output and an increase in prices, causing inflation.

Stagflation Is Often a Result of