An increase in the expected inflation rate shifts
A)both the short- run and the long- run Phillips curves upward.
B)neither the short- run nor the long- run Phillips curve.
C)the short- run but not the long- run Phillips curve upward.
D)the long- run but not the short- run Phillips curve upward.

Question

Quizplus · Accepted Answer

An increase in expected inflation shifts the short-run Phillips curve upward because it reflects higher inflation expectations, but the long-run Phillips curve remains vertical at the natural rate of unemployment, unaffected by inflation expectations.

An Increase in the Expected Inflation Rate Shifts