Consider Two Similar Economies Hit by the Same Temporary Negative

Multiple Choice

Consider two similar economies hit by the same temporary negative supply shock.In the economy with the more credible monetary policy,there will be ________.

A) smaller increases in both inflation and the real interest rate
B) a smaller increase in inflation and larger increase in the real interest rate
C) a smaller increase in inflation and larger decrease in output
D) a smaller increase in output and larger increase in the real interest rate