# [Solved] Use the Following Figure to Nswer the Question

## Use the following figure to nswer the question :

-The figure above illustrates the effect of an increased rate of money supply growth at time period T0. From the figure,one can conclude that the

A)Fisher effect is dominated by the liquidity effect and interest rates adjust slowly to changes in expected inflation.

B)liquidity effect is dominated by the Fisher effect and interest rates adjust slowly to changes in expected inflation.

C)liquidity effect is dominated by the Fisher effect and interest rates adjust quickly to changes in expected inflation.

D)Fisher effect is smaller than the expected inflation effect and interest rates adjust quickly to changes in expected inflation.

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- Q140: If the liquidity effect is smaller than the other effects,and the adjustment to expected inflation is immediate,then the A)interest rate will fall. B)interest rate will rise. C)interest rate will fall immediately below the initial level when the money supply grows. D)interest rate will rise immediately above the initial level when the money supply grows.
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- Q147: Use the following figure to answer the question : 11eca366_8c4c_8735_985f_338a001f15c8_TB1007_00 -Interest rates increased continuously during the 1970s. The most likely explanation is A)banking failures that reduced the money supply. B)a rise in the level of income. C)the repeated bouts of recession and expansion. D)increasing expected rates of inflation.
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