Question

Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate.

What is the slope of Japan’s short-run Phillips curve?
a. Steep downward slopeb. Flat downward slopec. Steep upward sloped. Flat upward slopee. Verticalf. Horizontal

Answer 1

Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate.

What is the slope of Japan’s short-run Phillips curve?

Option B is the correct answer.

Step-by-step explanation:

The slope of Japan’s short-run Phillips curve will be a flat downward slope because "it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate".

Therefore, option B is the correct answer.