If the expected inflation rate rises, then the short-run Phillips curve ________ and the long-run Phillips curve ________.
A) shifts; shifts
B) shifts; does not shift
C) does not shift; shifts
D) does not shift; does not shift
E) might shift; shifts only if the short-run Phillips curve shifts

Question

Quizplus · Accepted Answer

The short-run Phillips curve shifts because it reflects the trade-off between inflation and unemployment, which is affected by changes in expected inflation. The long-run Phillips curve does not shift because it is vertical at the natural rate of unemployment, indicating no long-term trade-off between inflation and unemployment.

If the Expected Inflation Rate Rises, Then the Short-Run Phillips