-In the above figure, what might have shifted the short- run Phillips curve from SRPC₁to SRPC₂ while leaving the long- run Phillips curve unchanged at LRPC? A) People's inflationary expectations might have decreased. B) People's inflationary expectations might have increased. C) The natural unemployment rate might have increased. D) The natural unemployment rate might have decreased.

Question

Quizplus · Accepted Answer

An increase in people's inflationary expectations would shift the short-run Phillips curve to the right, from SRPC1 to SRPC2, as higher expected inflation leads to higher actual inflation at any given level of unemployment. The long-run Phillips curve remains unchanged because it represents the natural rate of unemployment, which is not affected by inflation expectations.

-In the Above Figure, What Might Have Shifted the Short-