Suppose the long-run Phillips curve shifts to the left. For any given rate of money growth and inflation, how would unemployment and output change?
A) Unemployment would be higher, and output would be lower.
B) Unemployment would be higher, and output would be higher.
C) Unemployment would be lower, and output would be lower.
D) Unemployment would be lower, and output would be higher.

Question

Quizplus · Accepted Answer

A leftward shift of the long-run Phillips curve implies that there is a lower unemployment rate for any given rate of inflation. This means that the economy can operate at a lower unemployment rate without causing inflation. As a result, output increases as more workers are employed, and unemployment decreases. Therefore, the correct answer is D: Unemployment would be lower, and output would be higher.

Suppose the Long-Run Phillips Curve Shifts to the Left