Suppose the economy had been operating along a given short-run Phillips curve for several years and then experienced a year of stagflation.The year of stagflation would:
A)be represented as a move upward along the short-run Phillips curve.
B)be represented as a move downward along the short-run Phillips curve.
C)be represented as a point above the short-run Phillips curve.
D)be represented as a point below the short-run Phillips curve.
E)correspond to the origin.

Question

Quizplus · Accepted Answer

Stagflation occurs when the economy experiences both high inflation and high unemployment at the same time, which is not captured by the traditional Phillips curve trade-off between inflation and unemployment. Therefore, the year of stagflation would be represented as a point above the short-run Phillips curve.

Suppose the Economy Had Been Operating Along a Given Short-Run