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, a decrease in AS with no change in AD will cause
A) deflation.
B) stagflation.
C) economic growth.
D) deflationary growth.

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, a decrease in AS with no change in AD will cause
A) deflation. 
B) stagflation. 
C) economic growth. 
D) deflationary growth.

Quizplus · Accepted Answer

A decrease in AS would shift the AS curve to the left, causing higher prices (inflation) and lower output (recession). This is known as stagflation, a combination of inflation and recession. The AD curve remains unchanged, so there is no impact on economic growth. Deflationary growth is not a possible outcome in this scenario.

Refer to the Information Provided in Figure 12