In the long run, how does an increase in the rate of growth of the money supply shift the Phillips curves?
A) It shifts both the short-run and long-run Phillips curves to the right.
B) It shifts the long-run Phillips curve right and the short-run Phillips curve left.
C) It shifts only the short-run Phillips curve to the right.
D) It shifts only the short-run Phillips curve to the left.

Question

Quizplus · Accepted Answer

In the long run, an increase in the money supply leads to higher inflation expectations, shifting only the short-run Phillips curve to the right, as the long-run Phillips curve is vertical and unaffected by inflation.

In the Long Run, How Does an Increase in the Rate