Which of the following could create a movement along the short-run Phillips curve so that the unemployment rate temporarily falls below the natural unemployment rate ?
A) An increase in aggregate demand and a sticky wage rate
B) A decrease in aggregate demand and a sticky wage rate
C) An increase in aggregate demand and a quickly responsive wage rate
D) A decrease in aggregate demand and a quickly responsive wage rate
E) An increase in aggregate supply and a sticky wage rate

Question

Quizplus · Accepted Answer

An increase in aggregate demand and a sticky wage rate could create a movement along the short-run Phillips curve so that the unemployment rate temporarily falls below the natural unemployment rate. When aggregate demand increases, firms increase production and hire more employees, leading to a lower unemployment rate. However, if wages are sticky, they may not adjust immediately to the increased demand, resulting in temporarily lower unemployment.

Which of the Following Could Create a Movement Along the Short-Run