-Exhibit 16.5 shows a Phillips curve. Increases in both inflation and unemployment caused by a decrease in aggregate supply can be represented by an outcome such as _____.
A) point a to point b.
B) point b to point a.
C) point a to point c.
D) point a to point d.
E) point c to point d.

Question

-Exhibit 16.5 shows a Phillips curve. Increases in both inflation and unemployment caused by a decrease in aggregate supply can be represented by an outcome such as _____.
A) point a to point b. 
B) point b to point a. 
C) point a to point c. 
D) point a to point d. 
E) point c to point d.

Quizplus · Accepted Answer

A decrease in aggregate supply would typically lead to stagflation, a situation characterized by both increasing inflation and unemployment. This outcome is represented by a movement from point a to point c on the Phillips curve, indicating a rise in both inflation and unemployment.