Deregulation will cause the Phillips curve to shift to the right.
Deregulation will cause the Phillips curve to shift to the left because the AS curve shifts to the right in response to this supply-side policy.

Question

Quizplus · Accepted Answer

Deregulation is a supply-side policy that aims to decrease the government's involvement in the market and encourage more economic activity. This results in an increase in the supply of goods and services, which causes the AS curve to shift to the right. As a result, there is a decrease in the price level and an increase in output, leading to lower unemployment levels. A shift to the right in the AS curve will cause the Phillips curve to shift to the left, indicating a lower inflation rate for any given level of unemployment. Therefore, the statement "Deregulation will cause the Phillips curve to shift to the right" is incorrect, and the answer is B.

Deregulation Will Cause the Phillips Curve to Shift to the Right