How does the short-run Phillips curve reflect a financial crisis as the one in 2008-2009? a. as a leftward shift in the short-run Phillips curve b. as a rightward shift in the short-run Phillips curve c. as a downward movement along the short-run Phillips curve d. as an upward movement along the short-run Phillips curve Solution The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value. Recession is a component of financial crises. Negative GDP growth lasting two or more quarters is called a recession . In financial crises, because of recession, consumers and households are left with less disposable income thus reducing consumer spending. The short run Phillips curve shows a negative tradeoff between wage increases and the unemployment rate. With every increase in percentage change of wage rate there would be decreased unemployment rate and vice versa. Thus, a financial crises (reduced wages) being reflected by short run phillips curve is a downward movement along the short-run Phillips curve that is moving to the right along the short-run Phillips curve. Thus Option (C) is correct option. .