Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4
-Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, stagflation would be caused by
A) an increase in AS.
B) a decrease in AS.
C) an increase in AD.
D) a decrease in AD.

Question

Refer to the information provided in Figure 12.4 below to answer the questions that follow.  Figure 12.4
-Refer to Figure 12.4. If the economy is currently at the intersection of AS and AD, stagflation would be caused by
A) an increase in AS. 
B) a decrease in AS. 
C) an increase in AD. 
D) a decrease in AD.

Quizplus · Accepted Answer

Stagflation is a phenomenon where there is high inflation and low economic growth. This can occur when there is a decrease in aggregate supply (AS) which leads to higher prices and lower output. Therefore, if the economy is currently at the intersection of AS and AD, a decrease in AS (represented by a leftward shift of the AS curve) would cause stagflation.

Refer to the Information Provided in Figure 12