If inflation expectations rise,the short-run Phillips curve shifts
A)left.If inflation remains the same,unemployment falls.
B)left.If inflation remains the same,unemployment rises.
C)right.If inflation remains the same,unemployment falls.
D)right.If inflation remains the same,unemployment rises.

Question

Quizplus · Accepted Answer

If inflation expectations rise, firms will expect higher prices for their goods and services and will raise their prices. This leads to a higher level of inflation. As a result, the Phillips curve shifts to the right, indicating that at any level of unemployment, the inflation rate is higher than before. In this case, if inflation remains the same, unemployment will also rise due to the shift in the Phillips curve. Therefore, the correct answer is D.

If Inflation Expectations Rise,the Short-Run Phillips Curve Shifts