If expectations of inflation are greater than actual inflation, the short-run Phillips curve will eventually shift upward.

Question

Quizplus · Accepted Answer

If expectations of inflation are greater than actual inflation, it typically leads to adjustments in wage and price settings that can shift the short-run Phillips curve downward, as people adjust their expectations downwards. The Phillips curve illustrates the inverse relationship between the rate of inflation and the rate of unemployment.

If Expectations of Inflation Are Greater Than Actual Inflation, the Short-Run