All of the following are likely results of a negative demand shock EXCEPT
A)a negative output gap.
B)lower inflation.
C)IS shifts to the left.
D)Phillips curve shifts to the left.

Question

Quizplus · Accepted Answer

A negative demand shock would lead to a decrease in demand for goods and services, which would lead to lower prices and potentially lower output. This would result in a negative output gap and lower inflation. The IS curve would shift to the left as a result of decreased demand. However, the Phillips curve would shift to the right, as lower output would lead to higher unemployment and decreased wage pressure, resulting in higher inflation over time. Therefore, the incorrect statement is D - the Phillips curve would shift to the right, not the left.

All of the Following Are Likely Results of a Negative