Supply shocks move unemployment and inflation in
A) the same directions, as the Phillips Curve suggests.
B) opposite directions, as the Phillips Curve suggests.
C) the same directions, which is not what the Phillips Curve suggests.
D) opposite directions, which is not what the Phillips Curve suggests.
E) circles.

Question

Quizplus · Accepted Answer

Supply shocks, such as an increase in oil prices, can lead to higher inflation and higher unemployment simultaneously, moving them in the same direction, which contradicts the traditional Phillips Curve that suggests an inverse relationship between inflation and unemployment.

Supply Shocks Move Unemployment and Inflation in