Which of the following leads to an rightward shift in the short-run Phillips curve?
I. a reduction in inflationary expectations.
II. an increase in the natural rate of unemployment.
III. an increase in the velocity of circulation
A) I only
B) II only
C) I and II
D) I and III

Question

Quizplus · Accepted Answer

An increase in the natural rate of unemployment (option II) leads to a rightward shift in the short-run Phillips curve, meaning a higher rate of unemployment for any given rate of inflation. Option I, a reduction in inflationary expectations, would actually shift the Phillips curve leftward, while option III, an increase in the velocity of circulation, does not affect the Phillips curve.

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