The Three Figures Below Show the Phases of a Disinflation

Multiple Choice

The three figures below show the phases of a disinflation.In part (i) ,the economy is experiencing a sustained inflation at E₁. FIGURE 29-4 Refer to Figure 29-4,part (ii) ,Phase 2 of the disinflation process.The upward drift of the AS curve will generally continue longer,with rising unemployment and falling output,when

A) real wages and other factor prices are falling.
B) the price level is falling as a result of the disinflation.
C) firms and consumers regard the central bank's disinflation policy as highly credible.
D) the central bank pursues a contractionary monetary policy even more severe than they had announced.
E) firms and consumers do not regard the central bank's disinflation policy as credible.