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Stagflation would NOT be caused by aGroup of answer choicesdecrease in AS.higher price level with lower output.higher price level with higher unemployment.shift to the right of AD.

Question

Stagflation would NOT be caused by aGroup of answer choicesdecrease in AS.higher price level with lower output.higher price level with higher unemployment.shift to the right of AD.

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Solution

Stagflation is a situation in the economy where there is high inflation (higher price level) and high unemployment (lower output), along with stagnant demand. It is typically caused by a decrease in the supply of goods and services (AS) or a shift to the right of the aggregate demand (AD), which means an increase in demand.

So, the statement that would NOT cause stagflation is "higher price level with higher unemployment". This is because while it does involve a higher price level (inflation), it does not involve a decrease in output or an increase in demand, which are necessary conditions for stagflation.

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