According to the Phillips curve, a decrease in expected inflation generates:
A)a decrease in deflation.
B)an increase in inflation.
C)no change in the inflation rate.
D)a decrease in inflation

Question

Quizplus · Accepted Answer

According to the Phillips curve, there is an inverse relationship between inflation and unemployment in the short run. When expected inflation decreases, people and businesses adjust their behavior accordingly and reduce their price and wage expectations, leading to a decrease in inflation.

According to the Phillips Curve, a Decrease in Expected Inflation