Higher expected rates of inflation
A) lead to a decline in the money supply.
B) cause unions to settle for more moderate money wage increases.
C) stem from high industrial productivity growth rates.
D) force the money wages of labor downward.
E)shift the short-run Phillips curve upward to the right.

Question

Quizplus · Accepted Answer

Higher expected rates of inflation cause an increase in inflationary expectations among workers. This leads to demands for higher money wages to compensate for anticipated inflation. As a result, the short-run Phillips curve shifts upward and to the right, reflecting the increased trade-off between inflation and unemployment.

Higher Expected Rates of Inflation