A decrease in the natural unemployment rate shifts the long-run Phillips curve ________ and ________ the short-run Phillips curve.
A) rightward; does not shift
B) leftward; shifts rightward
C) rightward; shifts rightward
D) leftward; shifts leftward

Question

Quizplus · Accepted Answer

A decrease in the natural unemployment rate shifts the long-run Phillips curve leftward because it represents a lower unemployment rate at which inflation does not accelerate. It also shifts the short-run Phillips curve leftward because the short-run trade-off between inflation and unemployment occurs at lower unemployment rates.

A Decrease in the Natural Unemployment Rate Shifts the Long-Run