If the expected rate of inflation rose at the same time the natural rate of unemployment rose,the short-run Phillips curve
A)would shift down.
B)would shift up.
C)would not move.
D)might shift up or down or not move, depending on which effect was larger.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the inverse relationship between inflation and unemployment, assuming all other factors remain constant. If the expected rate of inflation rose while the natural rate of unemployment also rose, this would indicate that the economy is experiencing cost-push inflation, which occurs when production costs increase due to a decrease in supply or an increase in demand. In this case, the short-run Phillips curve would shift up, indicating that higher inflation is associated with a higher level of unemployment.

If the Expected Rate of Inflation Rose at the Same