If consumption depends positively on the level of real balances and real balances depend negatively on the nominal interest rate in a neoclassical model, then the nominal interest rate:
A) declines when the money growth rate rises.
B) is unchanged when the money growth rate rises.
C) rises 1 percent for each 1 percent rise in the money growth rate.
D) rises less than 1 percent for each 1 percent rise in the money growth rate.

Question

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The Answer of If consumption depends positively on the level of real balances and real balances depend negatively on the nominal interest rate in a neoclassical model, then the nominal interest rate:
A) declines when the money growth rate rises.
B) is unchanged when the money growth rate rises.
C) rises 1 percent for each 1 percent rise in the money growth rate.
D) rises less than 1 percent for each 1 percent rise in the money growth rate.

If Consumption Depends Positively on the Level of Real Balances