Suppose the Public Expects a 4 Percent Inflation Rate, While

Multiple Choice

Suppose the public expects a 4 percent inflation rate, while the Federal Reserve unexpectedly allows the money growth rate to be 5 percent. In the short run, we expect that

A) real interest rates will remain constant.
B) real interest rates may increase or decrease.
C) real interest rates will decrease.
D) real interest rates will increase.