A rise in the expected inflation rate leads to__________ in the long -run Phillips curve and___________ In the short-run Phillips curve.
A) no shift; an upward shift
B) an upward shift; no shift
C) no shift; no shift
D) a leftward shift; an upward shift

Question

Quizplus · Accepted Answer

In the long-run, the Phillips curve is vertical, indicating no trade-off between inflation and unemployment, so it does not shift with changes in expected inflation. In the short-run, an increase in expected inflation shifts the Phillips curve upward, as higher expected inflation leads to higher actual inflation at any given level of unemployment.

A Rise in the Expected Inflation Rate Leads To__________ in the Long