The Stagflation of the 1960s and 1970s Showed Policymakers That

question 261

Multiple Choice

The stagflation of the 1960s and 1970s showed policymakers that

• A) the Phillips curve should slope upward.
• B) the Phillips curve was always a useful tool of analysis.
• C) the Phillips curve could shift over time.
• D) Keynes was wrong in his analysis of aggregate demand.

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Definitions:

Overhead

Fixed costs that are not directly tied to production levels, such as rent, utilities, and administrative expenses, affecting a company's profitability.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production volume.

Shut Down

A short-term decision by a firm to cease operations temporarily due to unfavorable market conditions.

ATC Curve

Average Total Cost Curve; a graph that shows the per-unit cost of production at every level of output.