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Figure: AD-AS Model and the Short-Run Phillips Curve
-(Figure: AD-AS Model and the Short-Run Phillips Curve) Look at AD-AS Model and the Short-Run Phillips Curve. If the central bank decreases the money supply so that aggregate demand shifts from AD₂ to AD₁, then the unemployment rate will be:

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Figure: AD-AS Model and the Short-Run Phillips Curve

-(Figure: AD-AS Model and the Short-Run Phillips Curve) Look at AD-AS Model and the Short-Run Phillips Curve. If the central bank decreases the money supply so that aggregate demand shifts from AD₂ to AD₁, then the unemployment rate will be:

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A decrease in the money supply shifts the aggregate demand curve leftward, leading to lower output and higher unemployment. In the context of the Phillips Curve, this corresponds to a movement up along the curve, indicating a higher unemployment rate, which is 6% in this scenario.

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