The Phillips Curve will shift when
A) the expected inflation rate changes.
B) the price level falls.
C) the overall employment rate remains unchanged.
D) none of the above.

Question

Quizplus · Accepted Answer

The Phillips Curve represents the relationship between inflation and unemployment. It shows that when unemployment is low, inflation tends to be high and vice versa. However, this relationship can be influenced by changes in expectations. For example, if people expect inflation to rise, they may demand higher wages, leading to higher inflation even if unemployment remains the same. Therefore, a change in expected inflation rate will shift the Phillips Curve. The other choices are not correct because the Phillips Curve is not directly affected by changes in the price level or overall employment rate.

The Phillips Curve Will Shift When