Under the Reasonable Dynamic Assumptions, a Temporary Monetary Contraction Should

Multiple Choice

Under the reasonable dynamic assumptions, a temporary monetary contraction should result in:

A) an immediate rise in the interest rate, and then a further rise over time.
B) an immediate rise in the interest rate, and no further interest rate changes.
C) an immediate rise in the interest rate, and then a fall in the interest rate over time.
D) no change in the interest rate initially, and then a sudden rise to its new equilibrium value.
E) a very gradual but steady rise in the interest rate to its new equilibrium level.