what-role-does-expected-inflation-play-in-the-transition-from-short-run-to-long-

Question

What role does expected inflation play in the transition from short-run to long-run equilibrium?

Accepted Answer

It adjusts, leading to a new short-run Phillips curve and long-run equilibrium.

Answer

It increases, causing a permanent shift in the long-run Phillips curve.

Answer

It remains constant, maintaining the current short-run Phillips curve.

Answer

It decreases, causing a permanent shift in the long-run Phillips curve.