Starting from Long-Run Equilibrium in the Dynamic Model of Aggregate

Multiple Choice

Starting from long-run equilibrium in the dynamic model of aggregate demand and aggregate supply, a permanent reduction in the central bank's inflation target causes the nominal interest rate to:

A) decline continuously until reaching a lower level in the long run.
B) increase initially and then decline until reaching a lower level in the long run.
C) decline immediately to a lower level in the long run.
D) fall below and then rise continuously to long-run level below the initial level.