A decrease the Price of foreign oil ?
Correct answer: D. Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable
- A. Shifts the short-run Phillips curve downward and make the unemployment inflation trade-off less favorable
- B. Shifts the short run Phillips curve upward and makes the unemployment inflation trade-off more favorable
- C. Shifts the short run Phillips curve upward and makes the Unemployment inflation trade off more favorable
- D. Shifts the short run Phillips curve downward and makes the unemployment inflation trade off more favorable
Explanation
Cheaper foreign oil lowers firms’ production costs, reducing inflation at each unemployment rate and shifting the short-run Phillips curve downward. The trade-off becomes more favorable because lower inflation can coexist with the same unemployment rate.
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