Practice Quiz

CLEP Principles of Macroeconomics Exam Prep

Category - Macroeconomics

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Which of the following happens as a result of stagflation?
  1. The Phillips curve experiences a shift to the left
  2. The Phillips curve experiences a shift to the right
  3. Unemployment increases
  4. Both B and D
Explanation
Answer - D - Unemployment increases and thus, the Phillips curve experiences a shift to the right as a result of stagflation.

Key Takeaway: Stagflation occurs when the aggregate supply curve shift to the left, causing an increase in employment, a rise in price level, and a decrease in the real GDP. Because of this, the Phillips curve experiences a shift to the right.
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Additional Answers

Daniel Stromsodt says:

if the "unemployment increases" option could be moved to make it option D this would make more sense. Thanks for these questions though, they have been really helpful.

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