With adjusting expectations,the equilibrium at the natural rate of unemployment is obtained by
A) movement along the short-run Phillips curve.
B) fixed prices.
C) shifts in the short-run Phillips curve.
D) a fixed short-run Phillips curve.
E) rational expectations theory.

Question

Quizplus · Accepted Answer

With adjusting expectations, shifts in the short-run Phillips curve can occur to reach the equilibrium at the natural rate of unemployment. This means that the relationship between unemployment and inflation may change due to changes in expectations and other economic factors, rather than just a fixed relationship represented by a static Phillips curve.

With Adjusting Expectations,the Equilibrium at the Natural Rate of Unemployment