Suppose the economy had been operating along a given short-run Phillips curve for several years, and then the economy experienced a year of stagflation.How would the year of stagflation be represented?
A) as a move upward along the short-run Phillips curve
B) as a move downward along the short-run Phillips curve
C) as a point above the short-run Phillips curve
D) as a point below the short-run Phillips curve

Question

Suppose the economy had been operating along a given short-run Phillips curve for several years, and then the economy experienced a year of stagflation.How would the year of stagflation be represented?  
A) as a move upward along the short-run Phillips curve 
B) as a move downward along the short-run Phillips curve 
C) as a point above the short-run Phillips curve 
D) as a point below the short-run Phillips curve

Quizplus · Accepted Answer

A year of stagflation represents a point above the short-run Phillips curve because stagflation involves both high inflation and high unemployment, which is not represented by any point on the short-run Phillips curve. This indicates that the relationship between unemployment and inflation has broken down, which is a characteristic of stagflation.

Suppose the Economy Had Been Operating Along a Given Short-Run