Stagflation can result from
A)a leftward shift of the demand curve.
B)a rightward shift of the demand curve.
C)a leftward shift of the short-run aggregate supply curve.
D)a rightward shift of the short-run aggregate supply curve.
E)a rightward shift of the long-run aggregate supply curve.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a combination of high inflation and low economic growth. This can be caused by a leftward shift of the short-run aggregate supply (SRAS) curve, which means that the economy is producing less output at higher prices. This can be caused by an increase in input costs or a decrease in productivity. A leftward shift of the demand curve (A) would cause a decrease in output and potentially lower inflation. A rightward shift of either the demand curve (B) or the SRAS curve (D) would increase output and potentially lead to higher inflation, but not stagflation. A rightward shift of the long-run aggregate supply (LRAS) curve (E) would increase potential output and reduce both inflation and stagflation.

Stagflation Can Result from