A negative supply shock (e.g., oil price increase) shifts the Phillips curve and ____ the natural rate of unemployment. If the government wants to keep the economy at the original rate of unemployment, it must have ____ inflation.
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Inflation, unemployment and the Phillips curve has come up 106 times in 7 exams since 2006.
This question is on Supply shocks and stagflation, part of Inflation, unemployment and the Phillips curve in Macroeconomics.
How adverse supply shocks raise inflation and unemployment together.
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Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.