Monetary Policy in Highland

Multiple Choice

Monetary Policy in Highland
Highland has had inflation of 15% for many years. Highland establishes a new central bank, the Bank of Highland, with the hopes of reducing the inflation rate.
-Refer to Monetary Policy in Highland. The Bank of Highland reduced inflation to its announced goal of 5%. However, people were expecting inflation to fall to 7% and there was a favorable supply shock. In the short run which of the following made unemployment lower than otherwise?

A) both people expecting inflation to fall to 7% instead of 5%, and the favorable supply shock
B) neither people expecting inflation to fall to 7% instead of 5%, and the favorable supply shock
C) only the favorable supply shock
D) only people expecting inflation to fall to 7% instead of 5%