the natural rate of unemployment in elizaland is 5%. the citizens of elizaland expected inflation to be 2%…

the natural rate of unemployment in elizaland is 5%. the citizens of elizaland expected inflation to be 2% and unemployment to be 5% during 2018. however, inflation turned out to be 6% and unemployment 1.5%. what happens in the long run as people begin to expect a permanently higher rate of inflation? choose 1 answer: a the short - run phillips curve (srpc) shifts to the right b the long - run phillips curve (lrpc) shifts to the left c the short - run phillips curve (sprc) shifts to the left. d the long - run phillips curve (lrpc) shifts to the right e a movement to the right along the short - run phillips curve (srpc)

the natural rate of unemployment in elizaland is 5%. the citizens of elizaland expected inflation to be 2% and unemployment to be 5% during 2018. however, inflation turned out to be 6% and unemployment 1.5%. what happens in the long run as people begin to expect a permanently higher rate of inflation? choose 1 answer: a the short - run phillips curve (srpc) shifts to the right b the long - run phillips curve (lrpc) shifts to the left c the short - run phillips curve (sprc) shifts to the left. d the long - run phillips curve (lrpc) shifts to the right e a movement to the right along the short - run phillips curve (srpc)

Answer

Brief Explanations:

When people start expecting a permanently higher rate of inflation, in the short - run Phillips curve framework, the SRPC shifts. This is because the relationship between inflation and unemployment is affected by inflation expectations. An increase in expected inflation causes the SRPC to shift to the right. The LRPC is vertical at the natural rate of unemployment and is not affected by changes in expected inflation in the way described in the other options.

Answer:

A. The short - run Phillips curve (SRPC) shifts to the right