Suppose that the euro depreciates. Which figure shows the effect on the Phillips curve in Germany?

Question

Quizplus · Accepted Answer

A depreciation of the euro will lead to an increase in import prices and an increase in inflation in Germany. This means that the Phillips curve will shift upwards, as shown in figure B, where the original Phillips curve (PC1) shifts to the right to PC2. The other figures either do not show any shift in the Phillips curve or show a shift in the opposite direction.

Suppose That the Euro Depreciates