Suppose the Economy Is Initially Operating at the Natural Level

question 73

Multiple Choice

Suppose the economy is initially operating at the natural level of output.Now,suppose the central bank reduces the rate of nominal money growth by 2%.Given this information,we would expect that

• A)the nominal interest rate will fall by less than 2% in the medium run.
• B)the nominal interest rate will fall by exactly 2% in the medium run.
• C)the nominal interest rate will increase by exactly 2% in the medium run.
• D)the nominal interest rate will not change in the medium.
• E)none of the above

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