Which of the following would shift the short-run Phillips curve to the right?
A)an negative supply shock
B)an increase in inflationary expectations
C)a decrease in inflationary expectations
D)either (a) or (b)

Question

Which of the following would shift the short-run Phillips curve to the right?
A)​an negative supply shock
B)​an increase in inflationary expectations
C)​a decrease in inflationary expectations
D)​either (a) or (b)

Quizplus · Accepted Answer

Both a negative supply shock and an increase in inflationary expectations can shift the short-run Phillips curve to the right. A negative supply shock increases production costs, leading to higher prices (inflation) for the same level of unemployment. An increase in inflationary expectations can lead to higher wage demands, pushing costs and prices up, also for the same level of unemployment.

Which of the Following Would Shift the Short-Run Phillips Curve