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 not be caused by a
A) decrease in AS.
B) higher price level with lower output.
C) higher price level with higher unemployment.
D) shift to the right of 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. Stagflation would not be caused by a
A) decrease in AS. 
B) higher price level with lower output. 
C) higher price level with higher unemployment. 
D) shift to the right of AD.

Quizplus · Accepted Answer

Stagflation occurs when the economy experiences a combination of high inflation and high unemployment, which typically occurs when there is a decrease in AS. Therefore, choices A and B can be eliminated. Choice C describes a situation of high inflation and high unemployment, which is actually a characteristic of stagflation. The only option left is D, which involves an increase in AD, and would not be a cause of stagflation.

Refer to the Information Provided in Figure 12