Mokania has had inflation of 15% for many years. Mokania establishes a new central bank, the Bank of Mokania, with the hopes of reducing the inflation rate.
Refer to Monetary Policy in Mokania. The Bank of Mokania publicizes its intent to reduce the inflation rate to 5%. If it is successful in doing so but people had expected inflation to fall only to 10%, then
a. unemployment rises but it would have risen by more if people had expected inflation to be 6%.
b. unemployment falls but it would have fallen by more if people had expected inflation to be 6%.
c. unemployment falls but it would have fallen by less if people had expected inflation to be 6%.
d. unemployment rises but it would have risen by less if people had expected inflation to be 6%.