A decrease in the natural unemployment rate shifts the long-run Phillips curve __________ and __________ the short-run Phillips curve.

Question

Quizplus · Accepted Answer

A decrease in the natural unemployment rate shifts the long-run Phillips curve leftward because it represents a lower unemployment rate at which inflation does not accelerate. It also shifts the short-run Phillips curve leftward because the short-run trade-off between inflation and unemployment improves.

A Decrease in the Natural Unemployment Rate Shifts the Long-Run