Which of the following leads to a downward shift in the short- run Phillips curve?
A)People expect the unemployment rate to increase.
B)People expected inflation to be 5 per cent last year and now expect inflation to be 3 per cent this year.
C)Unexpected inflation increases.
D)The long- run Phillips curve shifts rightward.

Question

Quizplus · Accepted Answer

A downward shift in the short-run Phillips curve occurs when expected inflation decreases, as in option B where expected inflation drops from 5% to 3%.

Which of the Following Leads to a Downward Shift in the Short-