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 investment spending by firms will ________ and consumer durable spending will ________.

A) decrease; decrease
B) increase; decrease
C) decrease; increase
D) increase; increase