Suppose that the expected inflation rate is 8 percent and the unemployment rate is 3 percent. If the actual inflation rate rises to 10 percent and the expected inflation rate does not change, then
A) the short-run Phillips curve will shift upward.
B) the short-run Phillips curve will shift downward.
C) there will be a movement along the short-run Phillips curve.
D) the natural unemployment rate will rise.

Question

Quizplus · Accepted Answer

A movement along the short-run Phillips curve occurs when there is a change in the actual inflation rate without a change in the expected inflation rate, reflecting the trade-off between inflation and unemployment in the short run.

Suppose That the Expected Inflation Rate Is 8 Percent and the Unemployment