When the natural unemployment rate ________, the short-run Phillips curve shifts ________ and the long-run Phillips curve shifts ________.
A) increases; downward; leftward
B) decreases; upward; rightward
C) decreases; downward; rightward
D) increases; upward; rightward
E) increases; upward; leftward

Question

Quizplus · Accepted Answer

When the natural unemployment rate increases, it means there are fewer job opportunities and more people are unemployed, leading to a shift upward in the short-run Phillips curve. The long-run Phillips curve also shifts rightward because in the long run, wages and prices adjust to the new equilibrium level, resulting in a higher level of unemployment at any given level of inflation.

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