The "indirect effect" of a beneficial supply shock in the SP/LP model is
A)a rightward shift of LP.
B)a leftward shift of LP.
C)an upward shift of SP.
D)a downward shift of SP.

Question

Quizplus · Accepted Answer

A beneficial supply shock in the SP/LP (Short-run Phillips curve/Long-run Phillips curve) model leads to a downward shift of the SP curve, indicating that at any given rate of inflation, unemployment is lower due to the positive effects on production and economic efficiency.

The "Indirect Effect" of a Beneficial Supply Shock in the SP/LP