Use the Following Figure to Nswer the Question

question 58

Multiple Choice

Use the following figure to nswer the question :

-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)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.

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Definitions:

Mistakes

Errors or inaccuracies in actions or judgments.

Contract

A legally binding agreement between two or more parties that outlines obligations and rights of those involved.

Shipload

A measurement or quantity of cargo that is large enough to be carried by a ship.

Duress

Coercion or compulsion by threat or force, often affecting the validity of a contract.