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Question
Microeconomics
Posted 5 months ago
Which of the following would cause the long-run Phillips curve to shift to the right?
Choose 1 answer:
(A) An increase in aggregate demand (AD)
(B) An increase in cyclical unemployment
(C) An decrease in aggregate demand (AD)
D A decrease in frictional unemployment
(E) An increase in structural unemployment
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Answer from Sia
Posted 5 months ago
Solution
a
Definition of the Long-Run Phillips Curve (LRPC): The LRPC is vertical at the natural rate of unemployment, indicating no tradeoff between inflation and unemployment in the long run
b
Shift Factors: The LRPC can shift due to changes in the natural rate of unemployment, which can be influenced by factors such as structural and frictional unemployment
c
Structural Unemployment: An increase in structural unemployment, which is a mismatch between workers' skills and job requirements, would increase the natural rate of unemployment, causing the LRPC to shift to the right
Answer
(E) An increase in structural unemployment
Key Concept
Long-Run Phillips Curve (LRPC)
Explanation
The LRPC shifts to the right when there is an increase in the natural rate of unemployment, which can be caused by an increase in structural unemployment.
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