If the Liquidity Effect Is Smaller Than the Other Effects,and

question 31

Multiple Choice

If the liquidity effect is smaller than the other effects,and the adjustment to expected inflation is immediate,then the

• A)interest rate will fall.
• B)interest rate will rise.
• C)interest rate will fall immediately below the initial level when the money supply grows.
• D)interest rate will rise immediately above the initial level when the money supply grows.

---

Definitions:

Unconditioned Response

An automatic, natural response to a stimulus that does not require previous conditioning or learning.

Trial-And-Error

A problem-solving method involving repeated, varied attempts which are continued until success, or until the agent stops trying.

Negative Reinforcement

A behavioral principle where the removal of an unpleasant stimulus following a particular behavior increases the likelihood of that behavior being repeated.

Proximate Cause

The direct or immediate cause of an event or outcome, as opposed to more distant or ultimate causes.