Use the figure below to answer the following questions.
Figure 12.4.1
-Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.If the expected inflation rate changes to 3 percent a year, the
A)short run Phillips curve will shift downward and the long run Phillips curve will not change.
B)short run Phillips curve will shift downward and the long run Phillips curve will shift rightward.
C)short run Phillips curve will shift upward and the long run Phillips curve will shift leftward.
D)short run Phillips curve will shift upward and the long run Phillips curve will not change.
E)short run Phillips curve will shift upward and the long run Phillips curve will shift rightward.

Question

Use the figure below to answer the following questions.
  Figure 12.4.1
-Refer to Figure 12.4.1.The figure illustrates an economy's Phillips curves.If the expected inflation rate changes to 3 percent a year, the
A)short run Phillips curve will shift downward and the long run Phillips curve will not change. 
B)short run Phillips curve will shift downward and the long run Phillips curve will shift rightward. 
C)short run Phillips curve will shift upward and the long run Phillips curve will shift leftward. 
D)short run Phillips curve will shift upward and the long run Phillips curve will not change. 
E)short run Phillips curve will shift upward and the long run Phillips curve will shift rightward.

Quizplus · Accepted Answer

An increase in expected inflation rate will cause the short run Phillips curve to shift upward, as there will be higher inflation expectations in the short run. However, in the long run, this increase in inflation expectations will not have any effect on the natural rate of unemployment, and as a result, the long run Phillips curve will not shift.

Use the Figure Below to Answer the Following Questions