At time t=0, R_$= 10%, R= 10%, and E_$/=E^e_$/ = 1. Assume that due to a sudden change in preferences, aggregate money demand in Australia temporarily increases (for any R_$ and real output Y) at t=1. Assume that the Reserve Bank of Australia responds by temporarily increasing money supply to prevent any changes in R_$.

In addition, assume the following:

1. The change in money supply was not anticipated at t=0 2. Prices are fixed in the short run but flexible in the long run 3. Output is always fixed at Y 4. R= 10% at t=1

5. At t=2, aggregate money demand and money supply in Australia are back at their respective levels at t=0 6. A temporary change in money supply or money demand has no effect on prices in the short or long run 7. E^e_$/ = 1 at time t=1 and t=2

Select the most appropriate option:

	A.	E$/=1 at t=1 and E$/>1 at t=2
	B.	E$/>1 at t=1 and E$/=1 at t=2
	C.	E$/=1 at t=1 and t=2
	D.	E$/>1 at t=1 and t=2
	E.	E$/<1 at t=1 and>