An increase in the expected inflation rate leads to___________ the short -run Phillips curve.
A) a movement upward along
B) an upward shift of
C) a movement downward along
D) a downward shift of

Question

Quizplus · Accepted Answer

An increase in expected inflation means that workers and firms will expect higher prices, which will lead to firms raising their prices and workers demanding higher wages. This will cause an upward shift in the short-run Phillips curve, meaning that for any given level of unemployment, there will be a higher level of inflation.

An Increase in the Expected Inflation Rate Leads To___________ the Short