ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible. When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.

Detailed explanation-2: -Stagflation occurs when the short run aggregate supply curve shifts to the left. This reduces real output and real income, while boosting the price level. Boomflation occurs when aggregate demand shifts to the right, boosting real output and real income (in the short run), while increasing inflation.

Detailed explanation-3: -Stagflation is a period where economic growth stagnates, and inflation rises. This is characterized by high unemployment rates, rising prices and a decline in gross domestic product (GDP). For the typical consumer, stagflation causes their purchasing power to decrease, making it hard to meet basic needs.

Detailed explanation-4: -Which of the following would be most likely to result in stagflation? Increased government regulations on industry. Which of the following is NOT an example of positive supply-side policy? Higher marginal tax rates.

Detailed explanation-5: -The decrease in aggregate supply, caused by the increase in input prices, is represented by a shift to the left of the SAS curve because the SAS curve is drawn under the assumption that input prices remain constant.