The short-run Phillips curve could shift to the left as a result of either ____ or ____.
A)rising oil prices; increasing inflation expectations
B)rising wages; falling prices
C)declining oil prices; falling inflation expectations
D)falling wages; rising prices

Question

The short-run Phillips curve could shift to the left as a result of either ____ or ____.
A)​rising oil prices; increasing inflation expectations
B)​rising wages; falling prices
C)​declining oil prices; falling inflation expectations
D)​falling wages; rising prices

Quizplus · Accepted Answer

If oil prices decline, it leads to lower overall production costs for businesses and a decrease in the cost of producing goods and services. This, in turn, leads to a decrease in the overall price level and shifts the SRPC to the left. Falling inflation expectations also shift the SRPC to the left as it results in lower overall demand for goods and services, leading to a decrease in prices. Therefore, the correct answer is C - declining oil prices and falling inflation expectations.

The Short-Run Phillips Curve Could Shift to the Left as a Result