A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n):
A)increase in long-run aggregate supply.
B)increase in short-run aggregate supply.
C)decrease in the aggregate demand curve.
D)a simultaneous outward shift of the aggregate demand and supply curves.
E)a decrease in the short-run aggregate supply.

Question

Quizplus · Accepted Answer

A decrease in the short-run aggregate supply means that the production costs for firms have increased, leading to a decrease in output and an increase in prices. This will lead to both unemployment (due to decreased output) and inflation (due to increased prices) occurring at the same time.

A Simultaneous Increase in Both Unemployment and Inflation Is Most