Draw the graph · Macro · Phillips curve
A productivity boom
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 left. Long-run Phillips curve stays put.
A favorable supply shock is the mirror image of an oil shock. Lower costs mean lower inflation at any unemployment rate, and higher output means lower unemployment at any inflation rate. The short-run Phillips curve shifts left. The long-run Phillips curve is unchanged because the natural rate has not moved.
Inflation and unemployment both fall for a time.
Common mistake. Students sometimes move along the SRPC, trading lower inflation for higher unemployment. A favorable supply shock delivers both lower inflation and lower unemployment, which only a shift can show.
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Lesson: The Phillips Curve