Stagflation is the result of
A)a decrease in aggregate demand.
B)a decrease in short-run aggregate supply.
C)an increase in aggregate demand.
D)an increase in short-run aggregate supply.
E)a decrease in short-run aggregate supply combined with a simultaneous increase in aggregate supply.

Question

Quizplus · Accepted Answer

Stagflation occurs when there is a decrease in short-run aggregate supply, which leads to an increase in the price level and a decrease in output. This is different from typical inflation, which is caused by an increase in aggregate demand.

Stagflation Is the Result of