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:

Question 18 options:

	drop by 1.8 percent.
	increase by 1.8 percent.
	drop by 0.18 percent.
	increase by 0.18 percent.