Economics (AS & A Level) · May / June 2024 · Paper 31 · Question 21

The diagram represents the short-run Phillips curves SRPC1 and SRPC2 and the long-run Phillips curve in an economy, where NRU is the natural rate of unemployment. The economy is originally in equilibrium with no inflation. If the government introduces a fiscal stimulus to reduce unemployment, monetarists predict that there will be a series of movements before long-run equilibrium is restored. Which set of movements illustrates this prediction?

1. AJ to K to L
2. BL to K to J
3. CM to K to J
4. DM to K to L

As printed in the paper