Short-run Phillips curve:

The Short-Run Phillips Curve illustrates the inverse relationship between inflation and unemployment. A decrease in the federal funds target does not directly cause the SR Phillips Curve to shift; instead, it may influence points along the curve. The shift of the SR Phillips Curve typically occurs due to changes in expectations of inflation rather than changes in interest rates.

Lowering the federal funds target reduces interest rates, encouraging increased consumer spending and investment by businesses. This heightened economic activity results in a rightward shift of the Aggregate Demand curve, demonstrating the short-run impact of the Fed's monetary policy decision.

A decrease in the federal funds target typically leads to lower interest rates, which can result in a depreciation of the dollar rather than an appreciation. Lower interest rates can reduce foreign investment appeal, leading to a weaker dollar against other currencies, contrary to what this choice suggests.