If the economy is at the natural rate of unemployment but those who favor an active approach to policy think the natural rate is lower, they will try to shift
a. the short-run aggregate supply curve rightward
b. the aggregate demand curve rightward
c. the short-run aggregate supply curve leftward
d. the aggregate demand curve leftward
e. both the aggregate demand and the short-run aggregate supply curves leftward
Solution Preview
By Phillips Curve, the unemployment rate is negatively correlated with inflation rate. To ...
Phillips Curve Relationship. ... Present a thorough analysis of the inverse relationship between inflation and unemployment reflected by the Phillips curve. ...
... The Phillips Curve (PC) shows a short-term, inverse relationship between inflation and unemployment. ... The Phillips Curve shifts depending on various factors. ...
... expectations, which shifts the Phillips curve. However as unemployment increases, inflationary pressure eases, and eventually the Phillips curves returns to ...
... is higher than the rate of wage increase 2. According to the modern Phillips curve relationship, one percent decrease in the wage rate is equivalent to----. ...
... You can also show the Phillips curve to explain this phenomenon in terms of inflation. ... This means that the Phillips Curve is downward sloping. ...
