The natural rate hypothesis concludes that when the inflation rate increases, then in the long run there is
A) an upward movement along the short-run Phillips curve.
B) a downward movement along the short-run Phillips curve.
C) an upward shift of the short-run Phillips curve.
D) a downward shift of the short-run Phillips curve.
E) no change at all in the short-run Phillips curve.

Question

Quizplus · Accepted Answer

In the long run, an increase in the inflation rate leads to an upward shift of the short-run Phillips curve as expectations adjust, reflecting the natural rate of unemployment.

The Natural Rate Hypothesis Concludes That When the Inflation Rate