-The Figure Above Illustrates the Effect of an Increased Rate

question 48

Multiple Choice

-The figure above illustrates the effect of an increased rate of money supply growth at time period 0. From the figure, one can conclude that the

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

---

Definitions:

Shortfall

A deficiency or gap where something falls short of expectations or required levels.

Workers

Individuals engaged in a physical or mental activity to achieve a purpose or result, often in exchange for payment.

Visible Minorities

Individuals from racial or ethnic groups that are not in the majority within a specific community or country, often marked by visible differences.

Labour Shortages

A situation in which there are insufficient qualified candidates available to fill the positions needed by employers in the labor market.