Under the Adaptive Expectations Hypothesis, How Will a Shift to a More

Multiple Choice

Under the adaptive expectations hypothesis, how will a shift to a more expansionary monetary policy affect the economy?

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, but in the long run, output will increase.