The long-run response to an increase in the growth rate of the money supply is shown by shifting
A)the short-run and long-run Phillips curves left.
B)the short-run and long-run Phillips curves right.
C)only the short-run Phillips curve left.
D)only the short-run Phillips curve right.

Question

Quizplus · Accepted Answer

In the long run, an increase in the growth rate of the money supply leads to higher inflation expectations, shifting only the short-run Phillips curve to the right, as the long-run Phillips curve is vertical and unaffected by inflation expectations.

The Long-Run Response to an Increase in the Growth Rate