Refer to Exhibit 6. If the economy is currently at point (D), how will adjustments in people's inflation expectations affect the Phillips curve?

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The short-run Phillips curve will move toward the curve reflecting a 3% inflation expectation.The short-run Phillips curve will adjust toward the curve corresponding to a 9% inflation expectation.The short-run Phillips curve will shift toward the curve associated with a 6% inflation expectation.The long-run Phillips curve will shift leftward.None of the above changes will occur.

Explanation

When people update their inflation expectations, the short-run Phillips curve shifts to reflect these new expectations. However, the long-run Phillips curve represents the natural rate of unemployment and is vertical; it can shift leftward if structural changes improve the economy's potential output. Therefore, in this scenario, the long-run Phillips curve moves to the left.