A perfectly competitive firm faces a perfectly elastic demand curve

In the above figure, if we start at AD1 and SRAS1, and the money supply increases unexpectedly, what would be the short-run equilibrium even with rational expectations?

A) P1 B) E2 C) E3 D) E1

The Federal Open Market Committee's "balance of risks" is an assessment of whether, in the future, its primary concern will be

A) higher exchange rates or higher unemployment. B) higher inflation or a stronger economy. C) higher inflation or a weaker economy. D) lower inflation or a stronger economy.