Figure 22-8. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, "Inf Rate" means "Inflation Rate." -Refer to Figure 22-8. Faced with the shift of the Phillips curve from PC₁ to PC₂, policymakers will A)ask whether the shift is temporary or permanent. B)be concerned with how people adjust their expectations of inflation as a result of the shift. C)face, as well, a decision as to whether to accommodate the shock. D)All of the above are correct.

Question

Quizplus · Accepted Answer

All of the above responses are correct. Policymakers will need to assess whether the shift in the Phillips curve is permanent or temporary, as well as consider how people's expectations of inflation will adjust in response to the shift. Additionally, policymakers will have to make a decision about whether to accommodate the shock or not.