Draw the graph · Macro · Phillips curve
An oil shock hits
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.
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Short-run Phillips curve shifts right. Long-run Phillips curve stays put.
An adverse supply shock raises prices at any level of unemployment, and the fall in output raises unemployment at any inflation rate. Both push the same way: the short-run Phillips curve shifts right. The long-run Phillips curve is unchanged because the natural rate has not moved.
Inflation and unemployment both rise, a combination called stagflation.
Common mistake. Students sometimes move along the SRPC, trading higher inflation for lower unemployment. A supply shock brings both higher inflation and higher unemployment at once, which only a shift can show.
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Lesson: The Phillips Curve