A decrease in the expected inflation rate shifts the short- run Phillips curve
A) upward and creates a movement upward along the long- run Phillips curve.
B) downward and shifts the long- run Phillips curve leftward.
C) downward and creates a movement downward along the long- run Phillips curve.
D) upward and shifts long- run Phillips curve rightward.

Question

Quizplus · Accepted Answer

A decrease in the expected inflation rate shifts the short-run Phillips curve downward, indicating lower inflation for any level of unemployment, and results in a movement downward along the long-run Phillips curve as the economy adjusts to the new lower inflation expectations.

A Decrease in the Expected Inflation Rate Shifts the Short-