Which of the following leads to a rightward shift in the short-run Phillips curve?
I. a reduction in the expected inflation rate
II. an increase in the natural unemployment rate
A) I only
B) II only
C) I and II
D) neither I nor II

Question

Quizplus · Accepted Answer

An increase in the natural unemployment rate leads to a rightward shift in the short-run Phillips curve because it reflects a higher level of unemployment at which inflation does not accelerate, altering the trade-off between inflation and unemployment. A reduction in the expected inflation rate affects the position on the curve rather than shifting the curve itself.

Which of the Following Leads to a Rightward Shift in the Short-Run