Falling unemployment numbers have raised expectations of the Federal R

Magoosh Official Explanation:

Split #1: what word should follow “expectations”? The word “of” or the word “that”? The construction “expectations of” is acceptable if what comes next is a single noun --- “I have high expectations of the President.” If what comes after is a whole action, then the GMAT doesn’t approve of cramming actions into prepositional phrases. We need a full subordinate clause, with its [noun] + [verb] structure, to describe an action. In this case, the second half of the sentence is about the Fed performing an action. Therefore, the construction with “of” in (A) & (B) is incorrect.

Split #2: the context suggests that the action of the Federal Reserve will be a future action. Using the present tense in this context “expectations that the Federal Reserve increases ....” makes no sense: if they are doing it right now, then there’s no reason to expect it! That’s why (D) is wrong. Choice (E) is wrong because it uses a strange hypothetical construction “expectations that the Federal Reserve would cause an increase in ...” First of all, they would do this if what? It seems to create the expectation of a condition without specifying the condition. Furthermore, that long phrase “cause an increase in”, instead of “increase”, is an absolute monstrosity --- there is no way that would ever be correct on the GMAT. What we need is the simple future tense, which is exactly what (C) has.

(C) is the best possible answer.