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,a 5 percent increase in interest rates will cause the demand for money to:

A) drop by 1.8 percent.
B) increase by 1.8 percent.
C) drop by 0.18 percent.
D) increase by 0.18 percent.