A decrease in the expected level of inflation will cause short-run aggregate supply to ____ and the short-run Phillips curve to ____.
A)shift left; shift right
B)shift left; shift left
C)shift right; shift right
D)shift right; shift left

Question

A decrease in the expected level of inflation will cause short-run aggregate supply to ____ and the short-run Phillips curve to ____.
A)​shift left; shift right
B)​shift left; shift left
C)​shift right; shift right
D)​shift right; shift left

Quizplus · Accepted Answer

A decrease in expected inflation reduces production costs, shifting the short-run aggregate supply curve to the right. It also lowers the inflation rate for any given level of unemployment, shifting the short-run Phillips curve to the left.

A Decrease in the Expected Level of Inflation Will Cause