If inflation rises or falls faster than people forecast in the short run but not in the long run, what are the shapes of the Phillips curves?
A)The Phillips curve is vertical in the short run, and upward sloping in the long run.
B)The Phillips curve is downward sloping in the short run, and vertical in the long run.
C)The Phillips curve is upward sloping in the short run, and horizontal in the long run.
D)The Phillips curve is vertical in the short run and long run.

Question

If inflation rises or falls faster than people forecast in the short run but not in the long run, what are the shapes of the Phillips curves?
A)​The Phillips curve is vertical in the short run, and upward sloping in the long run.
B)​The Phillips curve is downward sloping in the short run, and vertical in the long run.
C)​The Phillips curve is upward sloping in the short run, and horizontal in the long run.
D)​The Phillips curve is vertical in the short run and long run.

Quizplus · Accepted Answer

In the short run, if inflation rises faster than people forecast, there will be a positive relation between inflation and unemployment (i.e. downward sloping Phillips curve). Conversely, if inflation falls faster than expected, there will be a negative relation between inflation and unemployment (i.e. upward sloping Phillips curve). However, in the long run, the Phillips curve is vertical as there is no trade-off between inflation and unemployment in the long run, and the economy returns to its natural rate of unemployment at any inflation rate.

If Inflation Rises or Falls Faster Than People Forecast in the Short