If the expected inflation rate is unchanged,a rise in the natural rate of unemployment would
A)shift the Phillips curve to the right.
B)not shift the Phillips curve.
C)shift the Phillips curve to the left.
D)shift the Phillips curve to the left and shift the long-run Phillips curve to the right.

Question

Quizplus · Accepted Answer

An increase in the natural rate of unemployment represents a decrease in the economy's potential output, which would lead to a decrease in the rate of output growth that corresponds with any given rate of inflation. As a result, in the short run, prices and wages will tend to be stickier than the long-run rate of output growth suggests, leading to relatively higher inflation than would otherwise be expected. As a result, a higher natural rate of unemployment would cause the Phillips curve to shift to the right.

If the Expected Inflation Rate Is Unchanged,a Rise in the Natural