The long-run effect of an increase in the growth rate of the quantity of money is a
A)higher real interest rate.
B)lower inflation rate.
C)lower real interest rate.
D)lower nominal interest rate.
E)higher nominal interest rate.

Question

Quizplus · Accepted Answer

In the long run, an increase in the growth rate of the quantity of money typically leads to higher inflation, which results in a higher nominal interest rate according to the Fisher effect.

The Long-Run Effect of an Increase in the Growth Rate