In the short run, a decline in aggregate demand would be associated with:
A) an inward shift of the Phillips curve.
B) an outward shift of the Phillips curve.
C) an upward movement along the Phillips curve.
D) a downward movement along the Phillips curve.
E) no change along the Phillips curve.

Question

Quizplus · Accepted Answer

A decline in aggregate demand would lead to a decrease in output and an increase in unemployment in the short run. This would result in a downward movement along the Phillips curve, as there would be downward pressure on wages and prices due to decreased demand in the economy.

In the Short Run, a Decline in Aggregate Demand Would