The LP curve shifts when
A)the natural real GDP changes.
B)expected inflation changes.
C)output deviates from the natural real GDP.
D)actual inflation changes.

Question

Quizplus · Accepted Answer

The LP curve, or Long-Run Phillips curve, shifts when the natural real GDP changes because it represents the relationship between inflation and unemployment at the natural level of output. Changes in expected inflation or actual inflation do not shift the LP curve; they affect the short-run Phillips curve instead.

The LP Curve Shifts When