When the natural unemployment rate increases, the short-run Phillips curve ________ and the long-run Phillips curve ________.
A) shifts upward; does not shift
B) shifts downward; does not shift
C) does not shift; shifts leftward
D) shifts upward; shifts rightward
E) shifts downward; shifts rightward

Question

Quizplus · Accepted Answer

When the natural unemployment rate increases, the short-run Phillips curve shifts upward because higher unemployment is associated with higher inflation. The long-run Phillips curve shifts rightward as the natural rate of unemployment itself has increased.

When the Natural Unemployment Rate Increases, the Short-Run Phillips Curve