Analyzing a Worsening Inflation-Unemployment Trade-off

A country's central bank makes a credible announcement that it will pursue a policy leading to higher inflation. As a result, both workers and firms revise their expectations, anticipating a higher rate of inflation in the coming years. Which of the following best describes the immediate consequence of this change in expectations on the short-run inflation-unemployment relationship?

If a country experiences several years of high inflation, causing both workers and firms to anticipate that this trend will continue, the established short-run trade-off between unemployment and inflation will remain stable.

The Role of Expectations in the Inflation-Unemployment Trade-off