If the Economy Is in a Long-Run Equilibrium When the Federal

Multiple Choice

If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it,________.

A) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate
B) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate
C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand
D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand
E) none of the above