Both the long-run and the short-run Phillips curve shift if
A) the expected inflation rate changes.
B) expected real GDP changes.
C) the expected unemployment rate changes.
D) the natural unemployment rate changes.
E) the actual inflation rate changes.

Question

Quizplus · Accepted Answer

The natural unemployment rate changes affect both the short-run and the long-run Phillips curve. If the natural unemployment rate increases, the short-run Phillips curve shifts to the right, indicating that a higher inflation rate is required to achieve the same level of employment. In the long-run, the Phillips curve will shift to the right as well, and the economy will settle at a higher inflation rate and the same level of unemployment.

Both the Long-Run and the Short-Run Phillips Curve Shift If