In the late 1960s and early 1970s, how did the short-run Phillips curve shift?
A) It shifted right as inflation expectations rose.
B) It shifted right as inflation expectations fell.
C) It shifted left as inflation expectations rose.
D) It shifted left as inflation expectations fell.

Question

Quizplus · Accepted Answer

In the late 1960s and early 1970s, inflation expectations were rising due to increases in government spending and monetary policy. As a result, the short-run Phillips curve shifted rightward, indicating that higher inflation was associated with higher levels of unemployment. This phenomenon was known as stagflation, and led to a reevaluation of traditional macroeconomic theories.

In the Late 1960s and Early 1970s, How Did the Short-Run