AP Macroeconomics Question 404: Answer and Explanation

Test Information

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Question: 404

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

Explanation:

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.