An increase in the expected rate of inflation would
A)shift the short-run Phillips curve upward.
B)shift the short-run Phillips curve downward.
C)shift the long-run Phillips curve to the right.
D)shift the long-run Phillips curve to the left.

Question

Quizplus · Accepted Answer

An increase in the expected rate of inflation would lead to an increase in inflationary expectations, causing firms to increase their prices at a faster rate. This would shift the short-run Phillips curve upward, indicating that there is a higher level of inflation at any given rate of unemployment.

An Increase in the Expected Rate of Inflation Would