1585EconomicsMedium
Refer to Exhibit 6. Suppose the economy is operating at point (D) As people revise their price expectations?
AThe long-run Phillips curve will shift to the left
BThe short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 9 per cent inflation
CThe short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 6 percent inflation
DThe short-run Phillips curve will shift in the direction of the short-run Phillips curve associated with an expectation of 3 percent inflation
Correct answer
A. The long-run Phillips curve will shift to the left
Explanation
The correct answer is The long-run Phillips curve will shift to the left.