Assume the Fed Implements Restrictive Monetary Policy

Multiple Choice

Assume the Fed implements restrictive monetary policy.Which of the following is the most likely result in an AD-AS framework with an upward sloping AS-curve?

A) the interest rate will increase but output, prices, and real money balances will fall
B) the interest rate, output, and prices will all decline
C) prices and output will fall, but real money balances will increase
D) real money balances will remain unchanged, since money supply and prices will decrease proportionally
E) real money balances and prices will fall proportionally