What is the long-run effect of an increase in expected inflation predicted by the Phillips curve model?
A) higher inflation,but no change in unemployment
B) higher inflation and higher output
C) lower inflation and lower unemployment
D) no change in inflation,but lower unemployment

Question

Quizplus · Accepted Answer

According to the Phillips curve model, there is a trade-off between inflation and unemployment in the short run. However, in the long run, the Phillips curve becomes vertical, meaning that there is no trade-off between inflation and unemployment. Instead, higher expected inflation leads to a higher rate of inflation over time, but does not impact the level of unemployment. Therefore, the long-run effect of an increase in expected inflation predicted by the Phillips curve model is a higher inflation rate, but with no change in unemployment.

What Is the Long-Run Effect of an Increase in Expected