Refer to Figure 13.7 for the following questions.
Figure 13.7

-Suppose that the economy is at point A on the Phillips curve in Figure 13.7. If the aggregate demand curve shifts to the right by more than the long-run aggregate supply curve does, then the economy will:
A)remain at point A on the Phillips curve.
B)move to point B on the Phillips curve.
C)move to point C on the Phillips curve.
D)move to point D on the Phillips curve.

Question

Refer to Figure 13.7 for the following questions.
Figure 13.7
 
-Suppose that the economy is at point A on the Phillips curve in Figure 13.7. If the aggregate demand curve shifts to the right by more than the long-run aggregate supply curve does, then the economy will:
A)remain at point A on the Phillips curve. 
B)move to point B on the Phillips curve. 
C)move to point C on the Phillips curve. 
D)move to point D on the Phillips curve.

Quizplus · Accepted Answer

When the aggregate demand curve shifts to the right by more than the long-run aggregate supply curve does, it results in an inflationary gap. This means that the actual unemployment rate is lower than the natural rate of unemployment, and the economy moves up the Phillips curve. Therefore, the economy will move to point B on the Phillips curve, which represents a higher level of inflation and a lower level of unemployment.

Refer to Figure 13.7 for the Following Questions