Figure 16.1

-Refer to Figure 16.1. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?
A) An inward shift of the aggregate demand curve
B) An outward shift of the aggregate demand curve
C) A movement down the aggregate supply curve
D) A movement down the aggregate demand curve
E) A movement up the aggregate demand curve

Question

Figure 16.1
 
-Refer to Figure 16.1. If the natural rate of unemployment is 5 percent, which of the following would cause a movement along Phillips curve III from point A to point B?
A) An inward shift of the aggregate demand curve 
B) An outward shift of the aggregate demand curve 
C) A movement down the aggregate supply curve 
D) A movement down the aggregate demand curve 
E) A movement up the aggregate demand curve

Quizplus · Accepted Answer

An outward shift of the aggregate demand curve would cause inflation to rise and unemployment to decrease, moving from point A to point B along Phillips curve III. This reflects the inverse relationship between unemployment and inflation depicted in the Phillips curve.

Figure 16.1 -Refer to Figure 16.1. If the Natural Rate of Unemployment