-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀. From the figure, one can conclude that the ________.
A)Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation
B)liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation
C)liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation
D)Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation

Question

-The figure above illustrates the effect of an increased rate of money supply growth at time period T₀. From the figure, one can conclude that the ________.
A)Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation 
B)liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation 
C)liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation 
D)Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation

Quizplus · Accepted Answer

The Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation.

-The Figure Above Illustrates the Effect of an Increased Rate