Asked by Kaylee Greydanus on May 11, 2024
Verified
Refer to Scenario 35-1. The short-run effects of rising world commodity prices are shown by
A) moving to the right along the short-run Phillips curve.
B) moving to the left along the short-run Phillips curve.
C) shifting the short-run Phillips curve right.
D) shifting the short-run Phillips curve left.
Short-Run Phillips Curve
A graphical representation that shows an inverse relationship between the rate of inflation and the unemployment rate in the short-term.
World Commodity Prices
The prices of goods such as oil, gold, coffee, etc., that are traded internationally and can fluctuate due to supply and demand dynamics.
- Recognize the impact of world commodity prices on the economy.
- Identify the differences in shifts and features between the short-run and long-run Phillips curves.
Verified Answer
DP
Daniel PerezMay 15, 2024
Final Answer :
C
Explanation :
Rising world commodity prices, such as oil and foodstuffs, typically lead to higher inflation. In the context of the short-run Phillips curve, which illustrates the trade-off between inflation and unemployment, higher inflation due to rising commodity prices would shift the short-run Phillips curve to the right. This shift indicates that for any given level of unemployment, the inflation rate is higher.
Learning Objectives
- Recognize the impact of world commodity prices on the economy.
- Identify the differences in shifts and features between the short-run and long-run Phillips curves.
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