For a given expected inflation rate, the higher the unemployment rate, the lower is the actual inflation rate.This relationship is the _______ Phillips curve.When the expected inflation rate changes, this is shown as a movement along the _______ Phillips curve.
A)long- run; natural
B)short- run; short- run
C)short- run; long- run
D)long- run; long- run
E)natural; short- run

Question

Quizplus · Accepted Answer

This is because the short-run Phillips curve shows the inverse relationship between unemployment and inflation in the short run, while the long-run Phillips curve shows that there is no relationship between the two variables in the long run (i.e. unemployment is at its natural rate). Therefore, a change in expected inflation would cause a movement along the short-run Phillips curve but would not affect the long-run Phillips curve.

For a Given Expected Inflation Rate, the Higher the Unemployment