Asked by Celeste Machado on May 31, 2024
Verified
If there is a favorable supply shock which direction does the short-run Phillips curve shift? What initially happens to unemployment and inflation as a result of this shock?
Favorable Supply Shock
An unexpected event that suddenly increases the supply of a product or service, resulting in decreased prices and increased quantity.
Short-run Phillips Curve
The short-run Phillips Curve represents the inverse relationship between inflation and unemployment in an economy over a short-term period.
Unemployment
The situation when individuals who are capable of working are not able to find a job despite actively seeking work.
- Relate fluctuations in population demographics and abrupt supply shifts to their influence on the Phillips curve and economic environment.
- Discuss the significance of supply shocks and central bank policies on short-term and long-term economic stability.
Verified Answer
SS
ShaVonte' SamuelMay 31, 2024
Final Answer :
The short-run Phillips curve shifts left. The unemployment rate and the inflation rate both fall.
Learning Objectives
- Relate fluctuations in population demographics and abrupt supply shifts to their influence on the Phillips curve and economic environment.
- Discuss the significance of supply shocks and central bank policies on short-term and long-term economic stability.