Question content area

Part $1$

A supply shock is

Part $2$

A$.$

an increase in the rate of inflation as a result of expansionary fiscal$$ policy, resulting in a leftward shift of the SRAS curve.

B$.$

a sudden increase in the price of an important natural$$ resource, resulting in a leftward shift of the SRAS curve.

C$.$

an increase in potential GDP caused by a government expenditure$$ multiplier, resulting in a leftward shift of the AD curve.

D$.$

an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the SRAS curve.

Part $3$

Stagflation is a

combination of inflation and recession

combination of discretionary and automatic fiscal policy

combination of inflation and recession

situation when the economy reaches full employment automatically

$.$

Part $4$

Stagflation occurs when

a supply shock shifts the SRAS to the left, increasing the price level and decreasing actual GDP

an increase in productivity produces a sudden jump in real GDP

a supply shock shifts the SRAS to the left, increasing the price level and decreasing actual GDP

a tax cut causes high rates of inflation along with high unemployment

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