The Economy Moves Down a Stationary Aggregate Demand Curve When

Multiple Choice

The economy moves down a stationary aggregate demand curve when the Fed:

A) increases its target inflation rate, reflected by a downward shift in the Fed's policy reaction function.
B) decreases its target inflation rate, reflected by an upward shift in the Fed's policy reaction function.
C) increases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.
D) decreases real interest rates in response to inflation, but does not change its target inflation rate or the Fed's policy reaction function.