Question

How does an increase in the aggregate demand translate in the phillips curve model?

a. as an upward movement along the short-run phillips curve
b. as a shift to the right of the short-run phillips curve
c. as a downward movement along the short-run phillips curve
d. as a shift to the left of the short-run phillips curve

Answer 1

An increase in aggregate demand in the Phillips curve model results in a shift to the right of the short-run Phillips curve.

Step-by-step explanation:

An increase in aggregate demand within the Phillips curve model translates to a shift to the right of the short-run Phillips curve. This shift is associated with lower unemployment and higher inflation rates in the short run. The Phillips curve represents the trade-off between inflation and unemployment, and a movement to the right indicates that for a given level of inflation, unemployment has decreased.