If the actual unemployment rate is less than the natural rate of unemployment, there will be a tendency toward:
A)increased inflation and a leftward shift of the short-run Phillips curve.
B)decreased inflation and a rightward shift of the short-run Phillips curve.
C)increased inflation and a rightward shift of the short-run Phillips curve.
D)decreased inflation and a leftward shift of the short-run Phillips curve.

Question

If the actual unemployment rate is less than the natural rate of unemployment, there will be a tendency toward:
A)​increased inflation and a leftward shift of the short-run Phillips curve.
B)​decreased inflation and a rightward shift of the short-run Phillips curve.
C)​increased inflation and a rightward shift of the short-run Phillips curve.
D)​decreased inflation and a leftward shift of the short-run Phillips curve.

Quizplus · Accepted Answer

When the actual unemployment rate is less than the natural rate, it indicates an economy operating above its potential, leading to increased inflation. This situation typically causes a rightward shift in the short-run Phillips curve as inflation expectations adjust.

If the Actual Unemployment Rate Is Less Than the Natural