If inflation is less than expected,then the unemployment rate is
A)greater than the natural rate.In the long run the short-run Phillips curve will shift right.
B)greater than the natural rate.In the long run the short-run Phillips curve will shift left.
C)less than the natural rate.In the long run the short-run Phillips curve will shift right.
D)less than the natural rate.In the long run the short-run Phillips curve will shift left.

Question

Quizplus · Accepted Answer

According to the short-run Phillips curve, there is an inverse relationship between inflation and unemployment. If inflation is lower than expected, then the short-run Phillips curve will shift leftward, indicating that the economy can have lower unemployment levels at any given rate of inflation. However, in the long run, prices and wages will adjust, and the natural rate of unemployment will remain unchanged. Therefore, in the long run, the short-run Phillips curve will shift rightward, indicating that any given rate of inflation will correspond to a higher level of unemployment. Hence, the unemployment rate is greater than the natural rate, and option B is the correct answer.

If Inflation Is Less Than Expected,then the Unemployment Rate Is