Ünite 6: Aggregate Demand-Aggregate Supply Analysis and Economic Stability — Hızlı Bakış
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Pay close attention to the region of the AS curve the economy is on; expansionary policies increase output in the Keynesian region but only increase prices in the Classical region.
Remember that stagflation is caused by a leftward shift of the AS curve (negative supply shock), which uniquely increases prices while decreasing output.
Differentiate between one-time price increases (caused by isolated shocks) and continuous inflation, which always requires a continuous increase in the money supply.
Note that central bank accommodation of fiscal policy to keep interest rates stable is a major driver of persistent, self-reinforcing inflation.
Keep in mind that the divine coincidence refers to the simultaneous achievement of both price stability and output stability.
