A decrease in the money supply leads to an initial increase but a long-run decrease in the equilibrium interest rate if the _____ effect dominates other effects. liquidity price level expected inflation none of the above Solution A decrease in the money supply leads to an initial increase but a long-run decrease in the equilibrium interest rate if the liquidity effect dominates other effects. .

1. A decrease in the money supply leads to an initial increase but a long-run decrease in the
equilibrium interest rate if the _____ effect dominates other effects.
liquidity
price level
expected inflation
none of the above
A. liquidity
B. price level
C. expected inflation
D. none of the above
Solution
A decrease in the money supply leads to an initial increase but a long-run decrease in the
equilibrium interest rate if the liquidity effect dominates other effects.