In the Phillips curve is a:
A) temporary demand shock.
B) permanent price change.
C) temporary cost shock.
D) temporary unemployment shock.
E) structural macroeconomic change.

Question

In the Phillips curve  is a:
A) temporary demand shock. 
B) permanent price change. 
C) temporary cost shock. 
D) temporary unemployment shock. 
E) structural macroeconomic change.

Quizplus · Accepted Answer

The Phillips curve shows the inverse relationship between inflation and unemployment. A temporary cost shock, such as an increase in oil prices, would cause an increase in production costs for firms, leading to a decrease in aggregate supply and causing unemployment to rise and inflation to increase. This is represented by a leftward shift in the short-run Phillips curve.

In the Phillips Curve Is A