A Study Has Estimated the Effect of Changes in Interest

question 95

Multiple Choice

A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be: ln M = 14.666 + .021 ln C − 0.036 ln r,where M denotes real money balances,C is an index of consumer confidence,and r is the interest rate paid on bank deposits.Based on this study,a 5 percent increase in interest rates will cause the demand for money to:

• A) drop by 1.8 percent.
• B) increase by 1.8 percent.
• C) drop by 0.18 percent.
• D) increase by 0.18 percent.

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Definitions:

Groundwater

Water that occupies the pore spaces and fractures in underground soil and rock, serving as a crucial source of water supply for both natural ecosystems and human use.

Quartzite

A hard, metamorphic rock formed from quartz-rich sandstone that has been subjected to high heat and pressure.

Hydraulic Fracturing

The use of high-pressure fluids and sand to open up fractures in limited-permeability reservoir rocks in order to extract oil and gas.

Shale Gas

Natural gas that is found trapped within shale formations, which are fine-grained sedimentary rocks.