With Rational Expectations, a Policy That Would Decrease AD Would

Multiple Choice

With rational expectations, a policy that would decrease AD would lead to:

A) ​lower inflation and lower unemployment in the short run if people underestimated the effect of the policy on inflation.
B) ​lower inflation and higher unemployment in the short run if people underestimated the effect of the policy on inflation.
C) ​lower inflation and an indeterminate effect on unemployment in the short run, if people's expectations were correct.
D) ​both (b) and (c) .