If the short-run aggregate supply curve is shifting left:
A)the short-run Phillips curve is shifting left.
B)the short-run Phillips curve is shifting right.
C)the long-run Phillips curve is shifting right.
D)the long-run Phillips curve is shifting left.

Question

If the short-run aggregate supply curve is shifting left:
A)​the short-run Phillips curve is shifting left.
B)​the short-run Phillips curve is shifting right.
C)​the long-run Phillips curve is shifting right.
D)​the long-run Phillips curve is shifting left.

Quizplus · Accepted Answer

The short-run aggregate supply curve represents the relationship between the price level and the quantity of output firms are willing to supply in the short run. When the curve shifts left, it means that firms are producing less output at each price level. This could be due to factors such as an increase in input prices or a decrease in productivity. As a result, the cost of production increases and firms may reduce their employment or output levels. This shift in the short-run aggregate supply curve leads to a higher price level and lower output, which leads to a movement along the short-run Phillips curve to higher inflation and higher unemployment rates. The short-run Phillips curve shows the trade-off between inflation and unemployment in the short run. When the short-run aggregate supply curve shifts left, the short-run Phillips curve shifts right, indicating that there is a higher level of unemployment for any given level of inflation in the short run.

If the Short-Run Aggregate Supply Curve Is Shifting Left