Suppose That the Economy Has Witnessed an 8 Percent Increase

Suppose that the economy has witnessed an 8 percent increase in its money supply over the last few years and the Fed now announces a plan to increase the money supply by 4 percent per year.What will be the public response, assuming that the Fed has a reputation for always implementing its announced plans?

A) High-wage contracts will prevail, and the economy will experience lower inflation at the cost of higher unemployment.
B) High-wage contracts will prevail, and the economy will experience lower unemployment at the cost of higher inflation.
C) Low-wage contracts will emerge, and the economy will experience lower inflation with no change in the unemployment rate.
D) Low-wage contracts will emerge and the economy will experience higher unemployment with no change in the inflation rate.
E) Low-wage contracts will emerge, and the economy will experience lower inflation at the cost of higher unemployment.