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Explain as to why a shift of the AS curve to the left results in a...

Explain as to why a shift of the AS curve to the left results in a Stagflation (rising inflation and rising unemployment at the same time). Stagflation can be a nightmare to an economy and to the country's policymakers / residents because it can be difficult to fix.

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Answer : AS (Aggregate Supply) curve shift to leftward when the aggregate supply decrease in the economy. Aggregate supply decrease in the economy means the overall production level has decreased in the economy. When the overall production level decrease in the economy then the employment level decrease which increase the unemployment level in the economy. Again due to decrease in production level the price level increase in the economy. This means that when the overall production level decrease in the economy then the price level and unemployment level both increase. And when overall production level decrease in the economy then the AS curve shift to leftward. A situation where price level and unemployment level increase in the economy at the same time, is known as stagflation. Hence if AS curve shift to leftward then the economy face a situation of stagflation.  

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