Final answer:
An economy will move up along the short-run Phillips curve when inflation is higher than expected, which demonstrates the short-term tradeoff between unemployment and inflation as depicted by the curve. After longer periods, shifts in the economy can change this relationship, as seen historically.
Step-by-step explanation:
An economy will move up along the short-run Phillips curve when the inflation rate is higher than expected. The Phillips Curve represents the tradeoff between inflation and unemployment, implying that usually one falls when the other rises. For example, during expansionary fiscal policy, which includes tax cuts or increased government spending, aggregate demand shifts to the right potentially reducing unemployment but increasing the rate of inflation.
However, the relationship depicted in the Phillips curve is often considered short-term because, over a more extended period, shifts in aggregate supply can result in both inflation and unemployment moving in the same direction, either up or down. This impact was observed in the 1970s and early 1980s when both were higher, and in the early 1990s and first decade of the 2000s when both were lower.