If the Economy Is in a Long-Run Equilibrium When the Federal

Multiple Choice

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

A) monetary policy would ultimately lead to higher inflation and real interest rates in the long run
B) monetary policy would ultimately lead to higher inflation and thus higher potential output
C) monetary policy would ultimately lead to higher potential output and real interest rates but no long-run impact on inflation
D) all of the above
E) none of the above