The effects of monetary changes are influenced by the slopes of the investment demand and money...
The effects of monetary changes are influenced by the slopes of the investment demand and money demand curves such that the
A.steeper the MD and ID curves, the greater the effect on interest rates and investment.
B.steeper the MD curve and the flatter the ID curve, the greater the effect on interest rates and investment.
C.flatter the MD and ID curves, the greater the effect on interest rates and investment.
D.money supply curve is vertical so only the slope of the ID curve matters.
E.flatter the MD curve and the steeper the ID curve, the greater the effect on interest rates and investment.
Homework Answers
Answer : Option C is correct. The slope of investment demand is flatter as compared to slope of money demand curve because the flatter the curve the greater is the effect on interest and investment. It means that as effect of monetary Change in the flatter of an investment curve as they more sensitive to the interest rate.
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