If the expected inflation rate rises, then the short-run Phillips curve _{--------------------}and the long-run Phillips curve_{--------------------} . A)does not shift; shifts B)might shift; shifts only if the short-run Phillips curve shifts C)does not shift; does not shift D)shifts; does not shift E)shifts; shifts

Question

Quizplus · Accepted Answer

The short-run Phillips curve shifts because it reflects the trade-off between inflation and unemployment, which is affected by changes in expected inflation. The long-run Phillips curve does not shift because it is vertical, representing the natural rate of unemployment, which is not affected by inflation expectations.

If the Expected Inflation Rate Rises, Then the Short-Run Phillips