A story from www.ft.com (1/31/2005) describing Ireland's transformation to a prosperous economy noted that "Ireland's story is unique: a small, English-speaking, non-industrialized country on the edge of Europe was able to secure structural funds from the EU, cut taxes, deregulate faster than its neighbours and attract lots of foreign companies in the process." If the natural rate of unemployment in Ireland decreased as a result of these policies, then ________ would shift ________.
A) the long-run and short-run Phillips curves; rightward
B) the long-run and short-run Phillips curves; leftward
C) only the long-run Phillips curve; leftward
D) only the short-run Phillips curve; rightward

Question

Quizplus · Accepted Answer

The natural rate of unemployment decreasing would shift both the long-run and short-run Phillips curves leftward, indicating lower unemployment at each level of inflation.

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