Consider the IS$-$MP$-$PC model for an economy in year $2025$ with the following equations:$($IS curve$)$ SRO $=$ a $-(1)/(2)($R$-$r$)($PC curve$)=+$SRO $+$ o$.$In these equations, SRO stands for short run output, $"$a$"$ is the aggregate demand shock. $"$r$"$ is the MPK $($rate of return on investment$),$ r is the actual inflation rate, ne is the expected inflation rate $($as of the first day of the year$),$ and $"$o$"$ is the inflation shock.Consider the following values for this economy: $($a$,$o$)=(0\%,0\%)$ and the MPK equals $3\%.$ Firms expect inflation to be $5\%$ and the Fed sets the real interest rate at $9\%.$Pick the correct answer.Actual inflation will be higher than expected inflation. Companies perceive a higher$-$than$-$usual usual level of demand for their products $($SRO$<0)$ and therefore mitigate their prices below the expected $($cost$)$ inflation.None of the other optionsActual inflation will be equal to expected inflation. Companies perceive the usual level of demand for their products $($SRO$=0)$ and therefore increase their prices by exactly the expected $($cost$)$ inflation.I Actual inflation will equal the MPK minus the interest rate.I Actual inflation will be lower than expected inflation. Companies perceive a lower$-$than$-$usual usual level of demand for their products $($SRO$<0)$ and therefore mitigate their prices below the expected $($cost$)$ inflation. Actual inflation will equal the interest rate minus the MPK$.$Consider the IS$-$MP$-$PC model for an economy in year $2025$ with the following equations:$($IS curve$)$ SRO $=$ a $-(1)/(2)($R$-$r$)$PC curve$)$ n $=$ ne $+$SRO $+$ o$.$In these equations, SRO stands for short run output, $"$a$"$ is the aggregate demand shock, $"$r$"$ is the MPK $($rate of return on investment$),$ n is the actual inflation rate, ne is the expected inflation rate $($as of the first day of the year$),$ and $"$o$"$ is the inflation shock.Consider the following values for this economy: $($a$,0)=(295,1\%)$ and the MPK equals $4\%.$ Firms expect inflation to be $5\%$ and the Fed sets the real interest rate at $0\%.$Pick the correct answer.SRO will be negative and inflation will be between $2$ and $3$ percentID SRO will be $4$ percent and inflation will be $6$ percentNone of the other optionsID SRO will be positive and inflation will be between $2$ and $3$ percentI SRO will be zero and inflation will be $5$ percentO SRO will be zero and inflation will be negative $1$ percentSRO will be negative $3$ percent and inflation will be $4\mathrm{.}25$ percent