If the short-run Phillips curve has shifted upward, the _____ curve has shifted to the _____.
A) AD; right
B) AD; left
C) SRAS; right
D) SRAS; left

Question

Quizplus · Accepted Answer

If the short-run Phillips curve has shifted upward, it means that there is now a higher level of inflation for any given level of unemployment. This reflects a decrease in short-run aggregate supply (SRAS), meaning that firms are facing higher costs of production, such as higher wages or raw material costs. The shift in the short-run Phillips curve is caused by a supply shock, such as an increase in oil prices or a natural disaster. Therefore, the SRAS curve has shifted to the left.

If the Short-Run Phillips Curve Has Shifted Upward, the _____