If a government redesigned its unemployment insurance programs so that the unemployed had greater incentives to quickly find appropriate jobs,then which of the following curves would shift right?
A)the long-run Phillips curve and the long-run aggregate supply curve
B)the long-run Phillips curve but not the long-run aggregate supply curve
C)the long-run aggregate supply curve but not the long-run Phillips curve
D)neither the long-run Phillips curve nor the long-run aggregate supply curve

Question

Quizplus · Accepted Answer

By increasing incentives for unemployed individuals to find jobs, this policy change would lead to an increase in the productive capacity of the economy and reduce any potential inflationary pressure from higher wages, so the long-run aggregate supply curve would shift right. However, the long-run Phillips curve, which shows the trade-off between unemployment and inflation, is not affected by supply-side policies and thus would not shift in response to this policy change. Therefore, the correct answer is C.

If a Government Redesigned Its Unemployment Insurance Programs So That