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What is stagflation and what are the ways we can grow out of it, or get out of it in the short-term?

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Kritika Krishnakumar
Kritika KrishnakumarLv10
28 Sep 2019
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Related questions

What is meant by the term 'stagflation'? What happens if stagflation occurs within the economy in terms of consumer spending and consumer confidence?

Explain whether each of the following statements is true or false, justifying your response.

The short-run aggregate supply (SAS) curve slopes upward because households spend more as their incomes increase.

The long-run aggregate supply curve can never shift.

Either a decrease in the nominal money supply by the Federal Reserve, all else held constant, or an increase in the price level, all else held constant, will shift the aggregate demand (AD) curve to the left.

The Keynesian portion of the short-run aggregate supply (SAS) curve would be relevant during a recessionary situation.

Stagflation occurs when the aggregate demand (AD) curve shifts out on the upward sloping portion of the short-run aggregate supply (SAS) curve.

2. Interest rates, the price level, and employment are closely interrelated concepts in macroeconomics. 

A. Describe the cause of stagflation and explain why stagflation presents difficulties for economic policymakers. (10 points)

B. Describe the factors that lead to higher and lower interest rates and explain how these changes in interest rates affect the economy. (9 points)

C. Describe the crowding-out effect and explain how this effect impacts a nation's economy. (9 points)

D. Countries often impose trade barriers against other countries. Explain how trade barriers affect both the domestic economy of the country imposing them and the global economy as a whole. (10 points)

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