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If the Fed announces that it is going to reduce the inflation rate by one percentage point, say from 3% per year to 2% per year, forever, and if the public immediately believes this announcement, 1.the short-run Phillips curve becomes flatter. 2.the long-run Phillips curve shift to the right by one percentage point. 3.the long-run Phillips curve shifts to the left by one percentage point. 4.the short-run Phillips curve shifts downward by 1 percentage point at each rate of unemployment. Which of the above answers in correct?

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If the Fed announces that it is going to reduce

the inflation rate by one percentage point, say from 3% per year to 2% per year, forever, and if the public immediately believes this announcement,

1.the short-run Phillips curve becomes flatter.

2.the long-run Phillips curve shift to the right by one percentage point.

3.the long-run Phillips curve shifts to the left by one percentage point.

4.the short-run Phillips curve shifts downward by 1 percentage point at each rate of unemployment.

Which of the above answers in correct?

 
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