If the Fed Makes a Credible Announcement That It Will

Multiple Choice

If the Fed makes a credible announcement that it will now increase the growth of aggregate demand with faster money growth, there will be

A) an upward shift of the short-run Phillips curve so that there is higher inflation without a decrease in unemployment.
B) a movement upward along an unchanging short-run Phillips curve so that inflation rises and unemployment decreases.
C) a rightward shift of the long-run Phillips curve.
D) no change in inflation or unemployment because the policy is credible and now anticipated.
E) a leftward shift of the long-run Phillips curve.