In the IS-LM-PC model studied in class, suppose that expected inflation is equal to the target inflation rate (it = it). Initially the economy starts at a medium run equilibrium where output is equal to potential output at the natural rate of interest. If there is a sudden increase in consumer confidence, the IS curve and in the short run In the medium run; output will , the natural rate of interest will be and the inflation rate will be O A. will shift right; output will be higher. In the medium run: be higher; lower, higher. O B. will not shift; output will be higher. In the medium run: return to potential; the same as at the initial equilibrium; higher. O C. will shift left; ouput will be lower. In the medium run: return to potential; lower, lower. O D. will shift right; output will be higher. In the medium run: return to potential; higher; the same as at the initital equilibrium