35. With rational expectations, a policy that would increase AD would lead to

a. higher inflation and lower unemployment in the short run if people underestimated the effect of the policy on inflation.

b. higher inflation and higher unemployment in the short run if people underestimated the effect of the policy on inflation.

c. higher inflation and no change in unemployment in the short run, if people’s expectations were correct.

d. higher inflation and an indeterminate effect on unemployment in the short run, if people’s expectations were correct.

e. both a and c.