In a World Where the Price Level Could Adjust Immediately

question 13

Multiple Choice

In a world where the price level could adjust immediately to its new long-run level after a money supply increase

• A) the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising.
• B) the dollar interest rate would not fall because prices would adjust immediately and prevent the money supply from rising.
• C) the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.
• D) the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing.
• E) the dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

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