What would we NOT expect to happen if government policy moved the economy up along a given short-run Phillips curve?
A) Ravi reads in the newspaper that the central bank decreased the money supply.
B) Tony gets more job offers.
C) Louis makes larger increases in the prices at his health food store.
D) Jessica's nominal wage increases at a faster rate.

Question

Quizplus · Accepted Answer

If the central bank decreased the money supply, it would shift the short-run Phillips curve to the right, resulting in higher unemployment and lower inflation. Therefore, we would not expect this to happen if government policy moved the economy up along a given short-run Phillips curve. The other choices are all consistent with the upward movement along the curve.

What Would We NOT Expect to Happen If Government Policy