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In a World Where the Price Level Could Adjust Immediately

Question 45

Multiple Choice

In a world where the price level could adjust immediately to its new long-run level after a money supply increase


A) the dollar interest rate would increase because prices would adjust immediately and prevent the money supply from rising.
B) the dollar interest rate would not fall because prices would adjust immediately and prevent the money supply from rising.
C) the dollar interest rate would fall because prices would adjust immediately and prevent the money supply from decreasing.
D) the dollar interest rate would decrease because prices would adjust immediately and prevent the money supply from decreasing.
E) the dollar interest rate would fall because prices would not be able to prevent the money supply from rising.

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