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Exhibit: AD-AS Shifts
-(Exhibit: Short-Run Phillips Curve) As the short-run Phillips curve shifts from A to B to C to D:
A) the expected rate of inflation is unchanged at every level of unemployment.
B) there is a lower-expected rate of inflation at every level of unemployment.
C) there is a higher-expected rate of inflation for every level of unemployment.
D) the natural rate of unemployment falls

Question

Use the following to answer questions :
Exhibit: AD-AS Shifts 
-(Exhibit: Short-Run Phillips Curve) As the short-run Phillips curve shifts from A to B to C to D:
A) the expected rate of inflation is unchanged at every level of unemployment. 
B) there is a lower-expected rate of inflation at every level of unemployment. 
C) there is a higher-expected rate of inflation for every level of unemployment. 
D) the natural rate of unemployment falls

Quizplus · Accepted Answer

As the short-run Phillips curve shifts from A to B to C to D, there is a lower-expected rate of inflation at every level of unemployment. This is because as the economy moves from point A to point D, there is a decrease in aggregate demand leading to lower prices and lower inflation expectations.

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