Changes in expectations of inflation, changes in the natural rate of unemployment, and supply shocks
A) change the level of planned expenditure and move the economy along the Phillips curve, raising and lowering inflation and unemployment.
B) change the level of aggregate supply and move the economy along the Phillips curve, raising and lowering inflation and unemployment.
C) change the level of planned expenditure and move the economy along the aggregate demand curve, raising and lowering inflation and unemployment.
D) change the position of the short-run Phillips curve, raising and lowering inflation and unemployment.

Question

Quizplus · Accepted Answer

Changes in expectations of inflation, changes in the natural rate of unemployment, and supply shocks actually shift the position of the short-run Phillips curve. This is because these factors alter the underlying economic conditions that determine the trade-off between inflation and unemployment, rather than simply moving the economy along a fixed Phillips curve.

Changes in Expectations of Inflation, Changes in the Natural Rate