An increase in the expected inflation rate leads to
A) a movement downward along the short- run Phillips curve.
B) a movement upward along the short- run Phillips curve.
C) an upward shift of the short- run Phillips curve.
D) a downward shift of the short- run Phillips curve.

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate causes workers to expect higher nominal wages, which increases production costs and leads to an upward shift of the short-run Phillips curve.

An Increase in the Expected Inflation Rate Leads to