The economy's natural unemployment rate is 4 percent.Table 12.4.2 gives some points on the economy's short- run Phillips curve.If the expected inflation rate rises to 8 percent a year,

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An increase in expected inflation rate leads to an upward shift of the short-run Phillips curve, indicating that a higher inflation rate is associated with a higher level of unemployment in the short run. The long-run Phillips curve does not shift in response to changes in expected inflation rate, as it is determined by the natural rate of unemployment and not affected by short-run fluctuations in inflation expectations. Therefore, both A and C are incorrect.

The Economy's Natural Unemployment Rate Is 4 Percent