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Question 94

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Use the following to answer questions:
Figure: Short-Run Determination of the Interest Rate Use the following to answer questions: Figure: Short-Run Determination of the Interest Rate -(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS<sub>2</sub> and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r<sub>1</sub>. In the long run prices will _____ the demand for money. A) decrease, decreasing B) decrease, increasing C) increase, decreasing D) increase, increasing
-(Figure: Short-Run Determination of the Interest Rate) Look at the figure Short-Run Determination of the Interest Rate. If the money supply is at MS2 and the Fed conducts contractionary monetary policy, in the short run the interest rate increases to r1. In the long run prices will _____ the demand for money.


A) decrease, decreasing
B) decrease, increasing
C) increase, decreasing
D) increase, increasing

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