A decrease in aggregate demand tends to cause a ____ a short run Phillips curve at first, then cause a ____ in the short run Phillips curve as people adjust their expectations.
A)Movement up along; upward shift.
B)Movement up along; downward shift.
C)Movement down along; upward shift.
D)Movement down along; downward shift.

Question

A decrease in aggregate demand tends to cause a ____ a short run Phillips curve at first, then cause a ____ in the short run Phillips curve as people adjust their expectations.
A)​Movement up along; upward shift.
B)​Movement up along; downward shift.
C)​Movement down along; upward shift.
D)​Movement down along; downward shift.

Quizplus · Accepted Answer

A decrease in aggregate demand initially causes a movement down along the short-run Phillips curve, leading to lower inflation and higher unemployment. Over time, as people adjust their expectations, the short-run Phillips curve shifts downward, reflecting lower expected inflation.

A Decrease in Aggregate Demand Tends to Cause a ____