Other things being equal, monetary policy will be more effective the flatter the investment-demand curve.

Question

Quizplus · Accepted Answer

This is because a flatter investment-demand curve indicates that changes in interest rates (which are influenced by monetary policy) have a larger impact on investment decisions. In contrast, a steep investment-demand curve means that even significant changes in interest rates may not have a large effect on investment.

Other Things Being Equal, Monetary Policy Will Be More Effective