"All for One, but None for All"
In an article regarding how Great Britain and France are addressing the economic crisis in 2008, Brit prime minister "is eager to encourage consumer spending" while France's president "wants to boo investment in both the private and public sectors." Both leaders are concerned because "hardly a da by without some manufacturing company announcing painful restructuring, plant closures or temporary lay- offs. "
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If the governments can increase consumption or investment while holding the expected inflation co there would be

Question

Quizplus · Accepted Answer

Increasing consumption or investment while holding expected inflation constant would lead to an increase in aggregate demand (AD) and a higher level of output and employment in the short run. This would result in a movement up along the short-run Phillips curve, which shows the inverse relationship between unemployment and inflation. A leftward shift of the AD curve, as suggested in choice B, would result in a lower level of output and employment. A movement down along the short-run Phillips curve, as suggested in choice C, would result in higher unemployment and lower inflation. A rightward shift of the long-run Phillips curve, as suggested in choice D, would require structural changes in the economy, such as improvements in productivity and efficiency, and would not be affected by short-term changes in consumption or investment.