A rightward shift of The Phillips Curve would suggest that:
A)the productivity of labour increased.
B)each higher rate of inflation is now associated with a higher rate of unemployment than previously.
C)cost-push inflation decreased.
D)a lower rate of inflation is now associated with each rate of unemployment than previously.

Question

Quizplus · Accepted Answer

A rightward shift of The Phillips Curve indicates that there is now a higher rate of unemployment associated with each rate of inflation than before. This suggests a decline in the short-run trade-off between inflation and unemployment, which could be due to factors such as supply-side shocks or changes in inflation expectations. Option A is not correct as the question asks about a rightward shift of the Phillips curve, which refers to a change in the relationship between inflation and unemployment, not productivity. Option C may or may not be correct, but it is not a necessary condition for a rightward shift of the Phillips curve. Option D is the opposite of the correct answer, as a rightward shift of the Phillips curve implies that the same rate of unemployment is associated with a higher rate of inflation than before, not a lower rate.

A Rightward Shift of the Phillips Curve Would Suggest That