If the investment demand function is I = c - dr and the quantity of real...
If the investment demand function is I = c - dr and the quantity of real money demanded is eY - fr , then fiscal policy is relatively potent in influencing aggregate demand when d is ______ and f is ______.
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a. large; small |
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b. small; small |
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c. small; large |
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d. large; large |
Homework Answers
d is small and f is large. This is because they respectively mean Is is steeper and LM is flatter respectively. So fiscal policy is more effective.
Answer: c: small; large.
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If the investment demand function is I = c - dr and the
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