Monetary policy will be
A)less effective the higher the interest elasticity of investment,and thus the steeper the IS schedule.
B)more effective the higher the interest elasticity of investment,and thus the flatter the IS schedule.
C)equally effective regardless of whether or not the interest elasticity of investment is higher or lower,or the IS curve is flatter or steeper.
D)more effective with a vertical IS curve.

Question

Quizplus · Accepted Answer

Monetary policy is more effective when the interest elasticity of investment is higher because a change in interest rates will have a larger impact on investment spending. This situation corresponds to a flatter IS curve, which indicates a greater sensitivity of investment to changes in interest rates.

Monetary Policy Will Be