(True, False) Stagflation happens when the economy is experiencing a bust and deflation. Stagflation occurs when the (AD, SR-AS) curve shifts to the (right, left). In the short-run, this shift would cause the overall price level to |(increase, decrease) and output to |(increase, decrease). Workers may see the short-run effect on the overall price level and negotiate for |(higher, lower) wages, resulting in a price-wage spiral. Given that 1) output

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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(True, False) Stagflation happens when the economy is experiencing a bust
and deflation.
Stagflation occurs when the
(AD, SR-AS) curve shifts to the
(right, left). In the short-run, this shift would cause the overall price level to
(increase, decrease) and output to
(increase, decrease).
Workers may see the short-run effect on the overall price level and negotiate for
(higher, lower) wages, resulting in a price-wage spiral. Given that 1) output
has
(increased, declined) in the short-run, there is a
(negative, positive, zero) output gap and that there is a
(negative, positive,
zero) cyclical unemployment, workers will eventually
(accept, fight for)
(higher, lower) wages. When this happens, the
(AD,
SR-AS, LR-AS) curve will shift to the
|(right, left), reaching the long-run
equilibrium.
Transcribed Image Text:(True, False) Stagflation happens when the economy is experiencing a bust and deflation. Stagflation occurs when the (AD, SR-AS) curve shifts to the (right, left). In the short-run, this shift would cause the overall price level to (increase, decrease) and output to (increase, decrease). Workers may see the short-run effect on the overall price level and negotiate for (higher, lower) wages, resulting in a price-wage spiral. Given that 1) output has (increased, declined) in the short-run, there is a (negative, positive, zero) output gap and that there is a (negative, positive, zero) cyclical unemployment, workers will eventually (accept, fight for) (higher, lower) wages. When this happens, the (AD, SR-AS, LR-AS) curve will shift to the |(right, left), reaching the long-run equilibrium.
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