Under the Reasonable Dynamic Assumptions Discussed in the Text,a Monetary

question 37

Multiple Choice

Under the reasonable dynamic assumptions discussed in the text,a monetary contraction should result in

• A)an immediate rise in the interest rate, and no further interest rate changes.
• B)an immediate rise in the interest rate, and then a fall in the interest rate over time.
• C)an immediate rise in the interest rate, and then a further rise over time.
• D)a very gradual but steady rise in the interest rate to its new equilibrium level.
• E) no change in the interest rate initially, and then a sudden rise to its new equilibrium value.

---

Definitions:

Total Product

The overall quantity of output or goods produced by a firm or economy over a specific time period.

Total Fixed Cost

The overall amount of costs that are unaffected by production volume or output.

Average Total Cost

the total cost of production divided by the number of units produced, representing the cost per unit.