If the natural rate of unemployment falls,
A)both the short-run and long-run Phillips curves shift left.
B)the short-run Phillips curve shifts left,the long-run Phillips curve is unchanged.
C)the short-run Phillips curve is unchanged,the long-run Phillips curve shifts right.
D)the short-run and the long-run Phillips curves shift right.

Question

Quizplus · Accepted Answer

A fall in the natural rate of unemployment implies that for any given rate of inflation, the unemployment rate is lower. This shifts both the short-run and long-run Phillips curves to the left, indicating lower unemployment at each level of inflation.

If the Natural Rate of Unemployment Falls