Stagflation is most likely to be caused by
A) both a leftward shift in aggregate supply and a rightward shift in aggregate demand
B) both a rightward shift in aggregate supply and a rightward shift in aggregate demand
C) a leftward shift in aggregate supply
D) a leftward shift in aggregate demand

Question

Quizplus · Accepted Answer

Stagflation is a situation in which an economy experiences both high inflation and low economic growth. This is most likely to be caused by a leftward shift in aggregate supply, meaning that the costs of production have increased, reducing the output and increasing the prices of goods and services. A rightward shift in aggregate demand, which results in higher economic growth, is unlikely to cause stagflation as it would typically lead to rising prices and higher economic activity.

Stagflation Is Most Likely to Be Caused by