-The Figure Above Illustrates the Effect of an Increased Rate

question 85

Multiple Choice

-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀.From the figure,one can conclude that the

• A)Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation.
• B)liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation.
• C)liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation.
• D)Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation.

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