If the expected rate of inﬂation rises, then the short-run Phillips Curve will
A) shift to the right.
B) shift to the left.
C) become vertical.
D) become ﬂat.

Question

Quizplus · Accepted Answer

A rise in the expected rate of inflation indicates that individuals and firms will adjust their behavior by demanding higher wages and prices, which leads to an increase in actual inflation. This shift in behavior leads to the short-run Phillips Curve shifting to the right.

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