If people do not anticipate a sudden increase in the growth rate of money supply, the...

 

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"If people do not anticipate a sudden increase in the growth rate of money supply, the change in the money supply will lead to an overall increase in interest rate if liquidity effect is smaller than the income and price-level effects." Do you agree with the above statement? Why or why not? Please also draw an appropriate diagram to show the dynamics of interest rate to justify your answers, on which you should explicitly show periods when different effects dominate. "If people do not anticipate a sudden increase in the growth rate of money supply, the change in the money supply will lead to an overall increase in interest rate if liquidity effect is smaller than the income and price-level effects." Do you agree with the above statement? Why or why not? Please also draw an appropriate diagram to show the dynamics of interest rate to justify your answers, on which you should explicitly show periods when different effects dominate.