Under the Rational Expectations Hypothesis, Which of the Following Is

Multiple Choice

Under the rational expectations hypothesis, which of the following is the most likely 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 real rate of output will increase, but in the long run, it will be unchanged.
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; in the long run, it will remain unchanged.