Monetary Policy in Mokania - Cont. 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. 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 8%, then A. unemployment rises but it would have risen by more if people had expected inflation to be 6%.

• B. unemployment rises but it would have risen by less if people had expected inflation to be 6%.
• C. unemployment falls but it would have fallen by more if people had expected inflation to be 6%.
• D. unemployment falls but it would have fallen by less if people had expected inflation to be 6%.