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Let Prices Be Perfectly Flexible

Question 59

Multiple Choice

Let prices be perfectly flexible. If the money stock were to increase by 10 percent, then you would expect to see


A) prices increase by 10 percent, real interest rates fall by 10 percent, and real GDP remain unchanged.
B) prices fall by 10 percent, real interest rates climb by 10 percent, and real GDP remain unchanged.
C) prices increase by 10 percent, real interest rates remain unchanged, and real GDP increase by 10 percent.
D) prices, real interest rates, and real GDP all increase by 10 percent.
E) none of the above.

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