If the natural unemployment rate increases, the long- run Phillips curve _______, the short- run Phillips curve _______, and the expected inflation rate _______ .
A)does not shift; shifts rightward; rises
B)shifts rightward; curve does not shift; falls
C)does not shift; does not shift; does not change
D)shifts rightward; shifts rightward; falls
E)shifts rightward; shifts rightward; does not change

Question

Quizplus · Accepted Answer

The long-run Phillips curve shifts rightward because the natural rate of unemployment is a determinant of its position, indicating a higher natural rate of unemployment at every level of inflation. The short-run Phillips curve also shifts rightward as it adjusts to changes in expectations and the natural rate of unemployment. However, the expected inflation rate does not change solely due to shifts in the natural rate of unemployment; it depends on monetary policy and other factors.

If the Natural Unemployment Rate Increases, the Long- Run Phillips