If interest rates are __________ to changes in the money supply and planned investment expenditures are __________ to interest rates,then monetary policy will be __________ in changing Gross Domestic Product.
A)sensitive; sensitive; effective
B)responsive; insensitive; ineffective
C)responsive; insensitive; effective
D)not responsive; sensitive; effective
E)not responsive; insensitive; effective

Question

Quizplus · Accepted Answer

If interest rates are sensitive to changes in the money supply and planned investment expenditures are sensitive to interest rates, then monetary policy will be effective in changing GDP because changes in the money supply will lead to changes in interest rates, which will then affect investment and GDP.

If Interest Rates Are __________ to Changes in the Money