Figure: AD and Monetary Policy Refer to the Figure

Multiple Choice

Figure: AD and Monetary Policy Refer to the figure. Suppose a given economy starts at point A in the figure. If the Fed engages in an expansionary monetary policy, what would you expect to happen in the short run?

A) Aggregate supply will decrease because of higher wages.
B) Aggregate demand will decrease because of higher interest rates.
C) Aggregate demand will increase because of lower interest rates.
D) The economy will move along the AD curve to a lower inflation rate.