In the long run, how does an increase in the rate of growth of the money supply shift the Phillips curves?
A)It shifts both the short-run and long-run Phillips curves to the right.
B)It shifts both the short-run and long-run Phillips curves to the left.
C)It shifts only the short-run Phillips curve to the right.
D)It shifts only the short-run Phillips curve to the left.

Question

Quizplus · Accepted Answer

In the long run, an increase in the money supply leads to higher inflation expectations, shifting only the short-run Phillips curve to the right, while the long-run Phillips curve remains vertical at the natural rate of unemployment.

In the Long Run, How Does an Increase in the Rate