Figure 13.11 Alt text for Figure 13.11: In figure 13.11, a graph of the Phillips curve.
Long description for Figure 13.11: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, short-run Philips Curve 1, begins at the top left corner and slopes down to the bottom center.A straight line labelled, short-run Philips Curve 2, follows the same slope as Curve 1, but is plotted to the right.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, and intersects the short-run Philips Curve 1, at point A on the bottom end of both lines.Point B is plotted half way along the short-run Philips Curve 1.Long-run Philips Curve, intersects the short-run Philips Curve 2, at point C in the top half of both lines.Point D is plotted more than half-way along short-run Philips Curve 2.Points E and F are plotted close to the left and right ends, respectively, of the short-run Philips Curve 2.
-Refer to Figure 13.11.A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by the Bank of Canada in 1989, would result in a movement from ________.

Question

Figure 13.11  Alt text for Figure 13.11: In figure 13.11, a graph of the Phillips curve.
Long description for Figure 13.11: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, short-run Philips Curve 1, begins at the top left corner and slopes down to the bottom center.A straight line labelled, short-run Philips Curve 2, follows the same slope as Curve 1, but is plotted to the right.A straight line labelled, long-run Philips Curve, is perpendicular to the x-axis, and intersects the short-run Philips Curve 1, at point A on the bottom end of both lines.Point B is plotted half way along the short-run Philips Curve 1.Long-run Philips Curve, intersects the short-run Philips Curve 2, at point C in the top half of both lines.Point D is plotted more than half-way along short-run Philips Curve 2.Points E and F are plotted close to the left and right ends, respectively, of the short-run Philips Curve 2.
-Refer to Figure 13.11.A follower of the new classical macroeconomics would argue that a contractionary monetary policy to lower inflation after a supply shock, like that pursued by the Bank of Canada in 1989, would result in a movement from ________.

Quizplus · Accepted Answer

According to the graph, a contractionary monetary policy would result in a movement from point C to point A, as the short-run Phillips Curve shifts to the left towards lower inflation and higher unemployment. Therefore, the best choice is D, which includes only the movement from C to A.

Figure 1311 Alt Text for Figure 13