Which of the following is characteristic of aggregate demand in Canada?
A)The exchange-rate effect is relatively small because exports and imports are a small part of real GDP.
B)The interest-rate effect is relatively small because investment spending is not very responsive to interest rate changes.
C)The wealth effect is relatively large because money holdings are a significant portion of most households' wealth.
D)The interest rate effect is relatively large.

Question

Quizplus · Accepted Answer

The interest rate effect refers to the impact changes in the interest rate have on borrowing and consumption. In Canada, investment spending is more responsive to interest rate changes, making the interest rate effect relatively large.

Which of the Following Is Characteristic of Aggregate Demand in Canada