Refer to the information provided in Figure 12.4 below to answer the questions that follow. Figure 12.4
-Refer to Figure 12.4. Stagflation would cause
A) a higher price level and lower output.
B) a higher price level and higher output.
C) a lower price level and lower output.
D) a lower price level and higher output.

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. Stagflation would cause
A) a higher price level and lower output. 
B) a higher price level and higher output. 
C) a lower price level and lower output. 
D) a lower price level and higher output.

Quizplus · Accepted Answer

Stagflation is a situation where the economy experiences high inflation and low economic growth simultaneously. This is represented in Figure 12.4 by a shift of the short-run aggregate supply curve (SRAS) to the left, resulting in higher prices (inflation) and lower output. Therefore, choice A is the correct answer.

Refer to the Information Provided in Figure 12