The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s.
Figure 14.2

-Refer to Figure 14.2. Following the movement from point A to point B on Phillips curve III, what would cause the Phillips curve to shift up so that 5 percent unemployment is associated with 10 percent inflation?
A) A movement up the aggregate supply curve
B) A movement down the aggregate supply curve
C) A movement down the aggregate demand curve
D) An outward shift of the aggregate supply curve
E) An inward shift of the aggregate supply curve

Question

The figure given below shows the Phillips curves of the U.S. economy during early 1960s to late 1970s.
Figure 14.2
 
-Refer to Figure 14.2. Following the movement from point A to point B on Phillips curve III, what would cause the Phillips curve to shift up so that 5 percent unemployment is associated with 10 percent inflation?
A) A movement up the aggregate supply curve 
B) A movement down the aggregate supply curve 
C) A movement down the aggregate demand curve 
D) An outward shift of the aggregate supply curve 
E) An inward shift of the aggregate supply curve

Quizplus · Accepted Answer

An inward shift of the aggregate supply curve would lead to higher inflation at the same level of unemployment, causing the Phillips curve to shift upwards.

The Figure Given Below Shows the Phillips Curves of the U.S