The figure given below depicts the long run equilibrium in an economy.?Figure 14.1??In the figure:?AD₁ and AD₂: Aggregate demand curves?AS₁ and AS₂: Aggregate supply curves

-Refer to Figure 14.1. Movement from point A to point C is equivalent to:
A) an upward movement along the long-run Phillips curve.
B) an outward shift of the short-run Phillips curve.
C) an upward movement along the short-run Phillips curve.
D) an inward shift of the long-run Phillips curve.
E) a downward movement along the long-run Phillips curve.

Question

The figure given below depicts the long run equilibrium in an economy.?Figure 14.1??In the figure:?AD₁ and AD₂: Aggregate demand curves?AS₁ and AS₂: Aggregate supply curves
 
-Refer to Figure 14.1. Movement from point A to point C is equivalent to:
A) an upward movement along the long-run Phillips curve. 
B) an outward shift of the short-run Phillips curve. 
C) an upward movement along the short-run Phillips curve. 
D) an inward shift of the long-run Phillips curve. 
E) a downward movement along the long-run Phillips curve.

Quizplus · Accepted Answer

Movement from point A to point C represents a decrease in aggregate demand causing a contraction of output and a decrease in the price level. This movement along the long-run Phillips curve shows that in the long run, there is no trade-off between inflation and unemployment, as unemployment returns to its natural rate, while inflation falls along with the decrease in output.

The Figure Given Below Depicts the Long Run Equilibrium in an Economy.?Figure