Which of the following shifts,ceteris paribus,will cause lower rates of both unemployment and inflation?
A)An increase in aggregate demand.
B)An increase in aggregate supply.
C)A decrease in aggregate demand.

Question

Quizplus · Accepted Answer

An increase in aggregate supply will shift the Phillips curve to the left, meaning lower rates of both unemployment and inflation. This is because an increase in aggregate supply means that firms are producing more output with the same amount of inputs, which drives down prices and reduces inflationary pressures. Additionally, higher output levels create more job opportunities, lowering unemployment rates. A decrease in aggregate demand would lead to lower inflation, but it would increase unemployment. Conversely, an increase in aggregate demand would lower unemployment but increase inflation.

Which of the Following Shifts,ceteris Paribus,will Cause Lower Rates of Both