Figure 16.1

-Refer to Figure 16.1. Following the movement from point A to point B on Phillips curve III, what would cause the Phillips curve to shift so that 5 percent unemployment would be associated with 10 percent inflation?
A) A movement up the aggregate supply curve
B) A movement down the aggregate supply curve
C) A movement down the aggregate demand curve
D) An outward shift of the aggregate supply curve
E) An inward shift of the aggregate supply curve

Question

Figure 16.1
 
-Refer to Figure 16.1. Following the movement from point A to point B on Phillips curve III, what would cause the Phillips curve to shift so that 5 percent unemployment would be associated with 10 percent inflation?
A) A movement up the aggregate supply curve 
B) A movement down the aggregate supply curve 
C) A movement down the aggregate demand curve 
D) An outward shift of the aggregate supply curve 
E) An inward shift of the aggregate supply curve

Quizplus · Accepted Answer

An inward shift of the aggregate supply curve would cause the Phillips curve to shift in such a way that a higher inflation rate would be associated with the same level of unemployment. This is because a decrease in aggregate supply (inward shift) typically leads to higher prices (inflation) without immediately affecting the unemployment rate.

Figure 16.1 -Refer to Figure 16.1. Following the Movement from Point a Movement