AP Macroeconomics Question 231: Answer and Explanation
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Consider the diagram above. In the short run, stagflation will move the economy from point B to
- A. point A.
- B. point A and then back to point B.
- C. point C.
- D. point D.
- E. point E.
Correct Answer: D
(D) Stagflation is inflation and recession (unemployment) at the same time. The only point shown with higher inflation and unemployment than B is point D. Indeed, stagflation causes the Phillips curve to shift right through a point such as D.