-In the Figure Above,illustrates the Effect of an Increased Rate

question 25

Multiple Choice

-In 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.

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