(Figure: Demand Shock 0) When the Economy Moves from a to B

question 77

Multiple Choice

(Figure: Demand Shock 0) When the economy moves from A to B, as shown in the graph on the left, how will inflation and the unemployment rate be affected, as shown in the graph on the right?

• A) There will be movement on the curve, so that inflation increases and unemployment decreases.
• B) There will be movement on the curve, so that inflation decreases and unemployment increases.
• C) The curve will shift left, so that both unemployment and inflation decrease.
• D) The curve will shift right, so that both unemployment and inflation increase.

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Definitions:

Hormones

Chemical messengers produced by glands, responsible for regulating physiological activities and maintaining homeostasis in the body.

Second Law

Presumably referencing the Second Law of Thermodynamics, which states that the entropy of any isolated system always increases.

Energy Disperses

A concept in thermodynamics and statistical mechanics where energy spreads out from a localized state to a more widespread and even distribution.