AP Macroeconomics Question 404: Answer and Explanation
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3. A negative, or contractionary, supply shock will
- A. shift the Phillips curve to the left.
- B. shift the investment demand curve to the right.
- C. shift the money demand curve to the right.
- D. shift the money supply curve to the left.
- E. shift the Phillips curve to the right.
Correct Answer: E
E-If SRAS shifts to the left, both inflation and unemployment rise, and results in a Phillips curve that is further to the right than before the supply shock.