Using the Phillips curves, what are the short-run and long-run ...

[kwoodring]

Using the Phillips curves, what are the short-run and long-run effects of a decrease in the inflation rate?
 
  What will be an ideal response?

Question 2

An increase in demand is represented graphically by a rightward shift of the demand curve.
 
  Indicate whether the statement is true or false

[dmurph1496]

Answer to Question 1

In the short run, there is first a downward movement along the short-run Phillips curve as the inflation rate falls and the unemployment rate increases. In the long run, however, the expected inflation rate falls and the short-run Phillips curve shifts downward. Therefore in the long run the inflation rate remains low and the unemployment rate returns to the natural unemployment rate.

Answer to Question 2

TRUE

[kwoodring]

TYSM

[yeungji]

Excellent