Table 28.2.2

-Refer to Table 28.2.2.The economy's natural unemployment rate is 4 percent.Table 28.2.2 gives some points on the economy's short-run Phillips curve.If the expected inflation rate rises to 8 percent a year,________.

Question

Table 28.2.2
 
-Refer to Table 28.2.2.The economy's natural unemployment rate is 4 percent.Table 28.2.2 gives some points on the economy's short-run Phillips curve.If the expected inflation rate rises to 8 percent a year,________.

Quizplus · Accepted Answer

If the expected inflation rate rises to 8 percent a year, the short-run Phillips curve shifts upward. This means that there will be a higher rate of inflation for any given level of unemployment in the short run. The long-run Phillips curve is not affected by changes in expected inflation rates. The natural rate of unemployment is a constant, so changes in expected inflation can only affect the position of the short-run Phillips curve. Therefore, choice B is the best answer.

Table 28.2.2 -Refer to Table 28.2.2.The Economy's Natural Unemployment Rate Is 4