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: ln M = 14.666 + .021 ln C − 0.036 ln r,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 we know that the interest elasticity is:

A) unitary.
B) zero.
C) very elastic.
D) very inelastic.