A) the interest rate can rise when the domestic money supply falls. B) the interest rate can decrease when the domestic money supply falls. C) the interest rate stays constant when the domestic money supply falls. D) the interest rate rises in the same proportion as the domestic money supply falls. E) the interest rate never rises when the domestic money supply falls. A) the interest rate can rise when the domestic money supply falls. B) the interest rate can decrease when the domestic money supply falls. C) the interest rate stays constant when the domestic money supply falls. D) the interest rate rises in the same proportion as the domestic money supply falls. E) the interest rate never rises when the domestic money supply falls.

A) an interest rate rise is associated with lower expected deflation and a long-run currency appreciation, so the currency appreciates immediately. B) an interest rate rise is associated with higher expected inflation and a long-run currency appreciation, so the currency appreciates immediately. C) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency appreciates immediately. D) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency depreciates immediately. E) an interest rate rise is associated with lower expected inflation and a long-run currency appreciation, so the currency appreciates immediately. A) an interest rate rise is associated with lower expected deflation and a long-run currency appreciation, so the currency appreciates immediately. B) an interest rate rise is associated with higher expected inflation and a long-run currency appreciation, so the currency appreciates immediately. C) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency appreciates immediately. D) an interest rate rise is associated with lower expected inflation and a long-run currency depreciation, so the currency depreciates immediately. E) an interest rate rise is associated with lower expected inflation and a long-run currency appreciation, so the currency appreciates immediately.