Which of the following results in stagflation?
A) an increase in technology
B) an increase in the growth rate of the quantity of money
C) a supply shock that decreases short- run aggregate supply
D) a decrease in the growth rate of the quantity of money

Question

Quizplus · Accepted Answer

Stagflation is a combination of high inflation and low economic growth. A supply shock that decreases short-run aggregate supply (such as an increase in oil prices) can cause both higher prices and lower output, leading to stagflation. The other options do not necessarily lead to stagflation. An increase in technology could lead to higher economic growth, an increase in the growth rate of the quantity of money could lead to higher inflation but not necessarily lower growth, and a decrease in the growth rate of the quantity of money could lead to lower inflation but not necessarily lower growth.

Which of the Following Results in Stagflation