An improved functioning of the labor markets will shift
A)both the long-run Phillips curve and the long-run aggregate supply curve to the right.
B)both the long-run Phillips curve and the long-run aggregate supply curve to the left.
C)the long-run Phillips curve to the right and the long-run aggregate supply curve to the left.
D)the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

An improved functioning of the labor markets increases the efficiency of labor, leading to lower natural rates of unemployment and higher output. This shifts the long-run Phillips curve to the left (indicating lower inflation at any level of unemployment) and the long-run aggregate supply curve to the right (indicating an increase in potential output).

An Improved Functioning of the Labor Markets Will Shift