Which of the following occurrences will cause stagflation? AS curve moves in AS curve moves out AD curve moves in AD curve moves out

Stagflation is a situation in the economy where there is high inflation and high unemployment, along with slow economic growth. This usually happens when the Aggregate Supply (AS) curve moves inwards.

Here's why:

1. When the AS curve moves inwards, it means that the total output of goods and services in the economy is decreasing. This could be due to various reasons such as a decrease in productivity, an increase in the cost of production, or a decrease in the availability of resources.

2. As the total output decreases, the prices of goods and services increase, leading to inflation.

3. At the same time, as the cost of production increases, firms may start laying off workers to cut costs, leading to an increase in unemployment.

4. The combination of high inflation and high unemployment, along with slow economic growth, is what is referred to as stagflation.

On the other hand, if the AS curve moves out, it would lead to an increase in total output and a decrease in prices, which is the opposite of stagflation. Similarly, movements in the Aggregate Demand (AD) curve can also affect inflation and unemployment, but they do not directly cause stagflation. If the AD curve moves in, it could lead to a decrease in output and an increase in unemployment, but not necessarily high inflation. If the AD curve moves out, it could lead to an increase in output and a decrease in unemployment, but it could also lead to high inflation if the economy is already producing at its maximum capacity.