An increase in aggregate demand tends to cause a ____ a short run Phillips curve at first, then cause a ____ in the short run Phillips curve as people adjust their expectations.
A)Movement up along; upward shift.
B)Movement up along; downward shift.
C)Movement down along; upward shift.
D)Movement down along; downward shift.

Question

An increase in aggregate demand tends to cause a ____ a short run Phillips curve at first, then cause a ____ in the short run Phillips curve as people adjust their expectations.
A)​Movement up along; upward shift.
B)​Movement up along; downward shift.
C)​Movement down along; upward shift.
D)​Movement down along; downward shift.

Quizplus · Accepted Answer

An increase in aggregate demand initially causes a movement up along the short-run Phillips curve, reflecting lower unemployment and higher inflation. Over time, as people adjust their expectations about inflation, the short-run Phillips curve shifts upward, indicating higher inflation at each level of unemployment.

An Increase in Aggregate Demand Tends to Cause a ____