According to the expectations-augmented Phillips curve model,the amount by which contractionary policies can lower the inflation rate for every one percent increase in the unemployment rate along a short-run Phillips curve,will hold only as long as private sector's expectations of inflation remains unchanged.When circumstances change and the public revise their expectations of inflation downward,the ___________ will shift ___________ and the rate of trade-off between unemployment and inflation will ___________.

Question

Quizplus · Accepted Answer

According to the expectations-augmented Phillips curve model, if the public revises their expectations of inflation downward, the short-run Phillips curve will shift downward (or to the right) and the rate of trade-off between unemployment and inflation will improve (or become better). Therefore, the correct answer is D) short-run Phillips curve; down; improve.

According to the Expectations-Augmented Phillips Curve Model,the Amount by Which