The diagram shows the short-run Phillips curves SRPC1 and SRPC2 together with the long-run Phillips curve for an economy, in which NRU is the natural rate of unemployment. At the outset, the economy is in equilibrium with zero inflation. If the government then uses fiscal stimulus to cut unemployment, monetarists say that a sequence of shifts will occur before long-run equilibrium is regained. Which set of movements matches this prediction?
- AJ to K to L
- BL to K to J
- CM to K to J
- DM to K to L