An increase in the expected inflation rate
A)shifts the long-run Phillips curve upward.
B)shifts the short-run Phillips curve upward.
C)leads to a movement downward along the short-run Phillips curve.
D)leads to a movement upward along the short-run Phillips curve.
E)shifts the short-run Phillips curve downward.

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate shifts the short-run Phillips curve upward because workers and firms adjust their expectations, leading to higher wage demands and prices at each level of unemployment.

An Increase in the Expected Inflation Rate