A Study Has Estimated the Effect of Changes in Interest

Multiple Choice

A study has estimated the effect of changes in interest rates and consumer confidence on the demand for money to be: lnM = 14.666 + .021 lnC - 0.036 lnr, where M denotes real money balances, C is an index of consumer confidence, and r is the interest rate paid on bank deposits.Based on this study, a 5% increase in interest rates will cause the demand for money to:

A) drop by 1.8%.
B) increase by 1.8%.
C) drop by.18%.
D) increase by.18%.