Which of the following is NOT true for the expectations-augmented Phillips curve?
A)the short-run curve shifts with changes in inflationary expectations
B)the position of the curve depends on the expected rate of inflation
C)if actual inflation is equal to expected inflation, we are at full-employment
D)if unemployment is below its natural rate, the curve will shift to the right
E)if wages and prices don't respond to changes in unemployment, the curve is vertical

Question

Quizplus · Accepted Answer

The expectations-augmented Phillips curve assumes that wages and prices respond to changes in unemployment. If they don't, the curve would be vertical, which is not consistent with the theory.

Which of the Following Is NOT True for the Expectations-Augmented