If the Nominal Interest Rate Is Currently

Multiple Choice

If the nominal interest rate is currently .03 and the central bank follows the rule nominal interest rate = .03 + .5(output gap) + 1.5(inflation rate - .04) ,
Then it will leave nominal rates unchanged in each of the following cases except

A) full employment with four percent inflation
B) a three percent output gap and three percent inflation
C) a supply shock causing six percent inflation and a negative output gap of six percent
D) a technology jump causing a fifteen percent output gap and one percent deflation
E) a two percent output gap and two percent inflation