How does an increase in the expected rate of inflation shift the Phillips curves?
A) It shifts only the short-run Phillips curve to the right.
B) It shifts only the short-run Phillips curve to the left.
C) It shifts the long-run Phillips curve right and the short-run Phillips curve left.
D) It shifts both the short-run and long-run Phillips curves to the left.

Question

Quizplus · Accepted Answer

An increase in the expected rate of inflation shifts only the short-run Phillips curve to the right because it reflects the immediate adjustments of wages and prices to the expected inflation, without affecting the long-run Phillips curve, which is vertical at the natural rate of unemployment.

How Does an Increase in the Expected Rate of Inflation