Suppose the expected inflation rate is 8 percent and the unemployment rate is 3 percent. If the inflation rate rises to 10 percent and the expected inflation rate does not change,
A) the short- run Phillips curve will shift downward.
B) there will be a movement along the short- run Phillips curve.
C) the natural unemployment rate will rise.
D) the short- run Phillips curve will shift upward.

Question

Quizplus · Accepted Answer

There will be a movement along the short-run Phillips curve because the actual inflation rate has changed while the expected inflation rate remains the same, indicating a change in the trade-off between inflation and unemployment.

Suppose the Expected Inflation Rate Is 8 Percent and the Unemployment