Making Use of Okun's Law, If the Bank of Canada

Multiple Choice

Making use of Okun's law, if the Bank of Canada reduces the money supply 5 percent and the quantity theory of money is true, then the unemployment rate will rise about:

A) 5 percent in both the short run and the long run.
B) 1.66 percent in both the short run and the long run.
C) 5 percent in the short run, but will return to its natural rate in the long run.
D) 1.66 percent in the short run, but will return to its natural rate in the long run.