Disinflation would cause

Question

Quizplus · Accepted Answer

Disinflation refers to a decrease in the rate of inflation (not deflation). In the short run, a decrease in the rate of inflation shifts the short-run Phillips curve to the right because unemployment temporarily increases due to lower inflationary expectations. However, in the long run, expectations adjust and the short-run Phillips curve shifts back to its original position. Therefore, disinflation only affects the short-run Phillips curve and not the long-run Phillips curve. The correct answer is D - the short-run Phillips curve, but not the long-run Phillips curve will shift right.

Disinflation Would Cause