If the natural rate of unemployment falls,
A)both the short-run Phillips curve and the long-run Phillips curve shift.
B)only the short-run Phillips curve shifts.
C)only the long-run Phillips curve shifts.
D)neither the short-run nor the long-run Phillips curves shift.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate of unemployment that exists when the economy is at full employment. If the natural rate of unemployment falls, it means that the economy can produce more output without causing inflation. This will shift both the short-run and long-run Phillips curves to the left.

If the Natural Rate of Unemployment Falls