Suppose We Know the Following Information About a Hypothetical Economy

Multiple Choice

Suppose we know the following information about a hypothetical economy: -real GDP = $485 billion
-potential GDP = $500 billion
-inflation rate = 4%
-target overnight interest rate = 6%
If the central bank implements a contractionary monetary policy in an effort to reduce the inflation rate,the short-run effect of this policy is likely to be that

A) unemployment will rise further beyond the NAIRU.
B) unemployment will fall below NAIRU.
C) the interest rate and the inflation rate will both rise and unemployment will fall.
D) the interest rate and the inflation rate will both fall and unemployment will rise.
E) all real variables will remain unchanged.