If people's inflation expectations rise, the short-run Phillips curve will: a) Shift left b) Shift right c) experience a downwards movement along the existing curve d) experience a upwards movement along the existing curve

If people's inflation expectations rise, the short-run Phillips curve will: a) Shift left b) Shift right c) experience a downwards movement along the existing curve d) experience a upwards movement along the existing curve

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 1SQP

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Question

If people's inflation expectations rise, the short-run Phillips curve will:

a) Shift left

b) Shift right

c) experience a downwards movement along the existing curve

d) experience a upwards movement along the existing curve

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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