A rise in the expected inflation rate leads to _ in the long- run Phillips curve and in the short- run Phillips curve.
A) a leftward shift; an upward shift
B) no shift; no shift
C) an upward shift; no shift
D) no shift; an upward shift

Question

Quizplus · Accepted Answer

In the long-run, the Phillips curve is vertical, indicating no trade-off between inflation and unemployment, so it does not shift. However, in the short-run, an increase in expected inflation shifts the short-run Phillips curve upward as higher expected inflation leads to higher actual inflation at any given level of unemployment.

A Rise in the Expected Inflation Rate Leads to _