If the Money Supply Growth Rate Permanently Increased from 4

Multiple Choice

If the money supply growth rate permanently increased from 4 percent to 10 percent, what would we expect to happen to the inflation rate and the nominal interest rate?

A) The inflation rate would increase by 6 percent, and the nominal interest rate would increase by less than 10 percent.
B) The inflation rate would increase by less than 6 percent, and the nominal interest rate would increase by 10 percent.
C) Both the inflation rate and the nominal interest rate would increase by 6 percent.
D) Both the inflation rate and the nominal interest rate would increase by less than 6 percent.