The Economy Is Growing at Its Long-Run Potential Growth Rate

Multiple Choice

The economy is growing at its long-run potential growth rate of 3% with an inflation rate of 4%.If a positive aggregate demand shock occurs and the Fed responds by decreasing money growth,but fails to offset the aggregate demand shock,then in the short run:

A) the real growth rate will be 3%,and the inflation rate will be 4%.
B) the real growth rate will be lower than 3%,and the inflation rate will be lower than 4%.
C) the real growth rate will be higher than 3% and the inflation rate will be lower than 4%.
D) the real growth rate will be higher than 3% and the inflation rate will be higher than 4%.