An increase in the natural unemployment rate shifts both the long-run Philips curve and the short-run Phillips curve rightward.

Question

Quizplus · Accepted Answer

When the natural unemployment rate increases, it means that the economy's potential output has decreased, leading to an increase in the long-run Phillips curve. Additionally, in the short run, this increase in unemployment leads to a decrease in demand and inflation, causing the short-run Phillips curve to shift rightward.

An Increase in the Natural Unemployment Rate Shifts Both the Long-Run