Either supply shocks or adjusting inflation expectations can shift the short run Phillips curve.

Question

Quizplus · Accepted Answer

Both supply shocks and adjusting inflation expectations can shift the short run Phillips curve. Supply shocks, such as an increase in oil prices or natural disasters, can lead to a decrease in aggregate supply and shift the Phillips curve upward. Adjusting inflation expectations, such as through changes in monetary policy or public communication, can also shift the Phillips curve by changing the relationship between unemployment and inflation.

Either Supply Shocks or Adjusting Inflation Expectations Can Shift the Short