Figure 11.2 -Refer to Figure 11.2..Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP,and then the economy experiences a negative demand shock.Other things equal,the negative demand shock is best represented by a(n) A) movement up along the Phillips curve. B) movement down along the Phillips curve. C) upward shift of the Phillips curve. D) downward shift of the Phillips curve.

Question

Quizplus · Accepted Answer

A negative demand shock typically leads to lower inflation and higher unemployment, which corresponds to a movement down along the Phillips curve.

Figure 11.2 -Refer to Figure 11.2..Assume the Economy Is in Equilibrium at Is