Stagflation can be described as a:
A) Shift right in the aggregate supply curve
B) Shift left in the aggregate supply curve
C) Period of stable prices and high unemployment
D) Period of rising prices and low unemployment

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a shift left in the aggregate supply curve, which means that prices are rising while output is decreasing. This is caused by a combination of inflationary pressures (such as an increase in input prices or higher demand) and a decrease in productive capacity (such as a decrease in technology or a decrease in labor force). It differs from the typical Phillips curve, which shows a trade-off between inflation and unemployment, as stagflation represents a negative relationship between inflation and output.

Stagflation Can Be Described as A