Under the Adaptive Expectations Hypothesis, Which of the Following Is

Multiple Choice

Under the adaptive expectations hypothesis, which of the following is the effect of a shift to a more expansionary monetary policy?

A) In the short run, the real rate of output will be unaffected, but in the long run, it will increase.
B) In the short run, the unemployment rate will decrease, but in the long run, it will self correct to the natural rate of unemployment.
C) There will be a permanent increase in the real rate of output, but the inflation rate will also be a little higher.
D) In the short run, the impact on the real rate of output is uncertain, but in the long run, output will increase.