suppose an economy is operating on its short-run Phillips curve, and the unemployment rate is below the natural rate of unemployment. Which of the following statements is correct?

Question

A. The economy is operating at a point on the long-run Phillips curve
B. The economy is operating at a point on the short-run Phillips curve to the left of the long-run Phillips curve
C. The economy is operating at a point on the short-run Phillips curve to the right of the long-run Phillips curve
D. The economy is operating at a point on the short-run Phillips curve below the long-run Phillips curve
E. The economy is operating at a point on the short-run Phillips curve above the long-run Phillips curve

Answer 1

B. The economy is operating at a point on the short-run Phillips curve to the left of the long-run Phillips curve

Since the unemployment rate is below the natural rate of unemployment, the economy is likely experiencing a period of low unemployment and inflation. This would correspond to a point on the short-run Phillips curve to the left of the long-run Phillips curve.