Consider a nation experiencing the relationship illustrated by the short run Phillips curve.An increase in both unemployment and inflation in this nation over the next ten years can be explained by:
A)a movement down along the short-run Phillips curve.
B)a series of outward shifts of the short-run Phillips curve.
C)a movement up along the short-run Phillips curve
D)a series of inward shifts of the short-run Phillips curve.
E)a complete change in the slope of the Phillips curve.

Question

Quizplus · Accepted Answer

If there is a series of outward shifts of the short-run Phillips curve, it means that there is a persistent increase in inflation even when unemployment rises. This can be caused by factors such as an increase in aggregate demand, cost-push shocks, or supply-side factors. Therefore, both unemployment and inflation will increase over time.

Consider a Nation Experiencing the Relationship Illustrated by the Short