"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 consumption and investment are increased by the governments' policies, we would expect a the short- run Phillips curve.

Question

Quizplus · Accepted Answer

If both governments are increasing consumer spending and investment, this will lead to an increase in aggregate demand. The short-run Phillips curve shows the relationship between unemployment and inflation in the short-term, and an increase in aggregate demand would lead to movement up along the Phillips curve. Therefore, the correct choice is C - increase in aggregate demand; movement up along the AD curve.