If the Public Has Rational Expectations and the Fed Reduces

Multiple Choice

If the public has rational expectations and the Fed reduces both reserve requirements and the discount rate, this would result in:

A) a higher level of real output and a lower price level in the long run.
B) a lower price level but no change in real output in the long run.
C) a higher price level and a reduced level of real output in the short run.
D) a higher price level but no change in real output in the short run.
E) a higher level of real output and a lower price level in the short run.