Monetary Policy in Mokania

Multiple Choice

Monetary Policy in Mokania
Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate.

-Refer to Monetary Policy in Mokania.The Bank of Mokania 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%