On the modern Phillips curve,the initial impact of productivity improvements that lower the costs of production is shown by ________.
A)an upward movement along the Phillips curve to a higher inflation rate
B)an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate
C)a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate
D)a downward movement along the Phillips curve to higher unemployment rates
E)none of the above

Question

Quizplus · Accepted Answer

The modern Phillips curve shows a downward shift in response to productivity improvements that lower the costs of production. This leads to lower inflation rates for any unemployment rate, as firms are able to produce goods and services more efficiently and at a lower cost, reducing the need to increase prices. Therefore, option (C) is the correct choice.

On the Modern Phillips Curve,the Initial Impact of Productivity Improvements