If people have rational expectations,but they are not always correct in their expectations,the expectation of a higher inflation rate will cause:
A) the short-run Phillips curve to become vertical.
B) the short-run Phillips curve to shift leftward.
C) a movement up along a short-run Phillips curve.
D) the short-run Phillips curve to shift rightward.

Question

Quizplus · Accepted Answer

If people expect higher inflation, they will demand higher wages, leading to higher costs for firms and thus shifting the short-run Phillips curve to the right.

If People Have Rational Expectations,but They Are Not Always Correct