Figure 36-8.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,"Inf Rate" means "Inflation Rate." -Refer to Figure 36-8.Subsequent to the shift of the Phillips curve from PC₁ to PC₂,the curve will soon shift back to PC₁ if people perceive the A)increase in the inflation rate as a temporary aberration. B)economic boom as a temporary aberration. C)increase in the inflation rate as a sign of a new era of higher inflation. D)economic boom as a sign of a new era of higher economic growth.

Question

Quizplus · Accepted Answer

If people perceive the increase in the inflation rate as a temporary aberration, they will not factor it into their long-term expectations and therefore the Phillips curve will shift back to its original position.