A Study Has Estimated the Effect of Changes in Interest

question 107

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 we know that the interest elasticity is:

• A) unitary.
• B) zero.
• C) very elastic.
• D) very inelastic.

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Definitions:

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