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Short-run Phillips Curve
-(Exhibit: Short-Run Phillips Curve) As the short-run Phillips curve shifts from A to B to C to D, policymakers face:
A) the same tradeoff between inflation and unemployment.
B) a lower rate of inflation for any level of unemployment.
C) a higher rate of inflation for any level of unemployment.
D) higher than expected inflation rates and lower unemployment rates.

Question

Use the following to answer questions :
Short-run Phillips Curve 
-(Exhibit: Short-Run Phillips Curve) As the short-run Phillips curve shifts from A to B to C to D, policymakers face:
A) the same tradeoff between inflation and unemployment. 
B) a lower rate of inflation for any level of unemployment. 
C) a higher rate of inflation for any level of unemployment. 
D) higher than expected inflation rates and lower unemployment rates.

Quizplus · Accepted Answer

As the short-run Phillips curve shifts from A to B to C to D, policymakers face a lower rate of inflation for any level of unemployment. This means that policymakers can achieve lower inflation rates without having to accept higher levels of unemployment. Therefore, the tradeoff between inflation and unemployment becomes less severe as the short-run Phillips curve shifts to the right.

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