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:

Sensation Seeking Scale

The Sensation Seeking Scale is a psychological tool used to measure an individual's propensity for seeking novel, complex, and intense sensations and experiences.

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Characterized by feeling nervous or timid in the presence of others, often leading to avoidance of social interactions.

Emotionally Expressive

The ability or tendency to outwardly display emotions or feelings through facial expressions, gestures, or speech.

Risky Vocations

Occupations that involve a high degree of danger or risk to the individual performing them.