When the expected inflation rate increases, the short-run phillips curve shifts upward.
The short-run phillips curve is drawn for the given expected rate of inflation. When there is an increase in the expected inflation, the short-run Phillips Curve shifts upward.
The Phillips curve states that there is an inverse relationship between unemployment and inflation in the short run, but not in the long run. The economy always operates on the short-run Phillips curve.
It is because the SRPC represents different combinations of inflation and unemployment.
The long-run Phillips curve is vertical in nature at the natural rate of unemployment. Shifts of the long-run Phillips curve occur only if there is a change in the natural rate of unemployment.
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