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Question
Statistics
Posted 4 months ago
In the graph of the Phillips curve shown here, an economy moved from point 1 to point 2 to point 3.
Which of the following would best represent the movement from point 2 to point 3 shown in the graph?
Choose 1 answer:
(A) A decrease in short-run aggregate supply (SRAS)
(B) An increase in short-run aggregate supply (SRAS)
(C) An increase in aggregate demand (AD)
(D) A decrease in aggregate demand (AD)
(E) An increase in the natural rate of unemployment
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Answer from Sia
Posted 4 months ago
Solution by Steps
step 1
Identify the movement on the Phillips curve graph. The economy moves from point 2 to point 3, which are both on the short-run Phillips curves (SRPC1 and SRPC2)
step 2
Note that the movement from point 2 to point 3 involves a shift from one short-run Phillips curve (SRPC1) to another (SRPC2). This indicates a change in the short-run aggregate supply (SRAS)
step 3
Determine the direction of the shift. Since the movement is from SRPC1 to SRPC2, which is to the left, it suggests a decrease in short-run aggregate supply (SRAS)
Answer
A
Key Concept
Short-run Phillips curve (SRPC) shifts
Explanation
A movement from one SRPC to another typically indicates a change in short-run aggregate supply (SRAS). A leftward shift in the SRPC, as seen from point 2 to point 3, corresponds to a decrease in SRAS.
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