Stagflation can be explained by a
A)shift in the short run Phillips curve to the left.
B)shift in the short run Phillips curve to the right.
C)a movement along the short run Phillips curve to the right.
D)a movement along the short run Phillips curve to the left.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a simultaneous increase in inflation and unemployment. This suggests a rightward shift of the short run Phillips curve, which shows the negative relationship between inflation and unemployment. As a result, policymakers are faced with a dilemma of whether to use expansionary or contractionary policies to address both issues, as traditional policies would have contradictory effects.

Stagflation Can Be Explained by a