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Question
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Posted 9 months ago
Which of the following actions would most likely lead to a shift to the left of the short-run Phillips curve, or SRPC?
Choose 1 answer:
(A) A strong central bank commitment to reducing inflation
(B) A strong central bank commitment to decreasing cyclical unemployment
(C) A strong government commitment to engage in expansionary fiscal policy
(D) A strong central bank commitment to increasing the money supply
(E) A strong government commitment to reducing structural unemployment
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Answer from Sia
Posted 9 months ago
Solution by Steps
step 1
To determine which action would most likely lead to a shift to the left of the short-run Phillips curve (SRPC), we need to understand the relationship between inflation and unemployment. The SRPC shows the inverse relationship between inflation and unemployment in the short run
step 2
A leftward shift in the SRPC indicates a reduction in both inflation and unemployment at any given level of economic activity. This can be achieved through policies that reduce inflation expectations or structural unemployment
step 3
A strong central bank commitment to reducing inflation (Option A) would lower inflation expectations, leading to a leftward shift in the SRPC
Answer
A
Key Concept
Reducing inflation expectations
Explanation
A strong central bank commitment to reducing inflation lowers inflation expectations, which can shift the short-run Phillips curve to the left.
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