Stagflation
Stagflation is a period of falling output and rising prices. This happens when the Aggregate Supply shifts ________
- If the government and central bank do not step in the aggregate ________ will shift ________ in the long run the economy will go from B to point ________. The risk is that sometimes there will be a wage spiral (which is when wages and price level keep rising) and it can take a long time to return to the natural output.
- If the government and central bank step in the aggregate ________ will shift ________ and the economy will go from B to point ________. The output will return to the natural level but the inflation will go ________.