An increase in the expected inflation rate shifts
A) both the short- run and the long- run Phillips curves upward.
B) the short- run but not the long- run Phillips curve upward.
C) neither the short- run nor the long- run Phillips curve.
D) the long- run but not the short- run Phillips curve upward.

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate shifts the short-run Phillips curve upward because it reflects higher inflation expectations, but it does not affect the long-run Phillips curve, which is vertical and represents the natural rate of unemployment.

An Increase in the Expected Inflation Rate Shifts