If Expected Inflation Falls, the Long-Run Phillips Curve Will

question 230

Multiple Choice

If expected inflation falls, the long-run Phillips curve will

• A)shift to the right.
• B)not be affected.
• C)shift to the left.
• D)become negatively sloped.
• E)become positively sloped.

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Definitions:

Inflation

A sustained increase in the general price level of goods and services in an economy over a period of time.

Unemployment

The condition of someone being able to work and actively seeking work but unable to find employment.

Natural Rate

A concept referring to the level of unemployment at which inflation is not accelerated, suggesting an equilibrium between demand for labor and supply.

Long-Run Aggregate-Supply

The total quantity of goods and services that producers in an economy are willing and able to supply at a full employment level, regardless of the price level, in the long term.