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

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.