If inflationary expectations increase,we can infer that:
A)unemployment is above the natural rate.
B)the economy is not on the long-run Phillips curve.
C)the short-run Phillips curve is shifting to the left.
D)output is below potential GDP.
E)the unemployment rate is at the natural rate.

Question

Quizplus · Accepted Answer

Inflationary expectations increasing suggests that the economy is not on the long-run Phillips curve, which implies that there is a trade-off between inflation and unemployment in the short run but not in the long run. In the long run, changes in inflation are determined solely by changes in money supply growth.

If Inflationary Expectations Increase,we Can Infer That