An increase in the expected inflation rate shifts
A) both the short-run and the long-run Phillips curves upward.
B) the short-run but not the long-run Phillips curve upward.
C) the long-run but not the short-run Phillips curve upward.
D) neither the short-run nor the long-run Phillips curve.

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate shifts the short-run Phillips curve upward because it reflects the trade-off between inflation and unemployment in the short term. The long-run Phillips curve is vertical, indicating no trade-off between inflation and unemployment in the long run, and thus it is not affected by changes in expected inflation.

An Increase in the Expected Inflation Rate Shifts