Suppose in a Given Economy, We Start at Point a as Shown

Multiple Choice

Suppose in a given economy, we start at Point A as shown 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 lower 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.