Under the Reasonable Dynamic Assumptions Discussed in the Text,a Monetary

question 37

Multiple Choice

Under the reasonable dynamic assumptions discussed in the text,a monetary contraction should result in

• A)an immediate rise in the interest rate, and no further interest rate changes.
• B)an immediate rise in the interest rate, and then a fall in the interest rate over time.
• C)an immediate rise in the interest rate, and then a further rise over time.
• D)a very gradual but steady rise in the interest rate to its new equilibrium level.
• E) no change in the interest rate initially, and then a sudden rise to its new equilibrium value.

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