Tax Cuts and Economic Impact: Unraveling the Phillips Curve Relationship

The answer to this question depends on how this tax cut is implemented and utilized. If the tax cut is given to people who are likely to spend more, it could stimulate aggregate demand. In the short run, this can lead to higher inflation and lower unemployment, which would be represented by the movement along the Short Run Phillips Curve up and left. Later, once expectations adjust, the Long Run Phillips Curve shifts right. However, the context and economic situation should ideally be considered to select the best answer. If given the available options, we go with 'Movement along the Short Run Phillips Curve up and left'.