The figure given below represents the short run and long run Phillips curve.
Figure 14.4

-Refer to Figure 14.4. A movement from point A to point C would be associated with an:
A) outward shift of both the aggregate demand and the aggregate supply curve.
B) outward shift of the aggregate supply curve and an inward shift of the aggregate demand curve.
C) outward shift of the aggregate demand curve and an inward shift of the aggregate supply curve.
D) outward shift of the aggregate demand curve but no change in the aggregate supply curve.
E) inward shift of both the aggregate demand and the aggregate supply curve

Question

The figure given below represents the short run and long run Phillips curve.
Figure 14.4
 
-Refer to Figure 14.4. A movement from point A to point C would be associated with an:
A) outward shift of both the aggregate demand and the aggregate supply curve. 
B) outward shift of the aggregate supply curve and an inward shift of the aggregate demand curve. 
C) outward shift of the aggregate demand curve and an inward shift of the aggregate supply curve. 
D) outward shift of the aggregate demand curve but no change in the aggregate supply curve. 
E) inward shift of both the aggregate demand and the aggregate supply curve

Quizplus · Accepted Answer

Moving from point A to point C would result in a higher level of inflation (indicated by a higher vertical position on the Phillips curve) and a higher level of output (indicated by a further to the right position on the Phillips curve). To achieve this, there would need to be an increase in aggregate demand, which would shift the Phillips curve outward, and a decrease in aggregate supply, which would shift the Phillips curve inward. Therefore, the correct answer is C.

The Figure Given Below Represents the Short Run and Long