If expected inflation increases:
A)the short-run Phillips curve shifts up.
B)the short-run Phillips curve shifts down.
C)the short-run Phillips curve remains unchanged.
D)there is a movement along a short-run Phillips curve.

Question

Quizplus · Accepted Answer

When expected inflation increases, the short-run Phillips curve shifts up because workers and firms adjust their expectations and demand higher wages and prices, leading to a higher rate of inflation at every level of unemployment.

If Expected Inflation Increases