Question $14$

Which one of the following will likely happen if the central bank announces a rise in

short term interest rates from $4\%$ to $6\%$ when the market was expecting short term

interest rates to remain at $4\%$ according to the "announcement effect" hypothesis?

A$)$ The money supply rises and the price of Treasury bills rises.

B$)$ The money supply falls, the price of Treasury bills falls.

C$)$ The money supply is unchanged and the price of Treasury bills rises.

D$)$ The money supply is unchanged and the price of Treasury bills falls.

E$)$ None of the above