If aggregate demand decreases, the
A) short-run Phillips curve shifts rightward.
B) short-run Phillips curve does not shift nor is there a movement along it.
C) economy moves to a lower inflation rate along its short-run Phillips curve.
D) economy moves to a higher inflation rate along its short-run Phillips curve.
E) short-run Phillips curve shifts leftward.

Question

Quizplus · Accepted Answer

When aggregate demand decreases, it typically leads to lower inflation and higher unemployment, which means the economy moves to a lower inflation rate along its short-run Phillips curve.

If Aggregate Demand Decreases, the