Monetary Policy Is Less Effective Than It Was in the Past

question 282

Multiple Choice

Monetary policy is less effective than it was in the past because

• A) investment has become less sensitive to interest rate changes.
• B) the substitution effect of an interest rate change on consumption has increased.
• C) the income effect of an interest rate change on consumption has increased.
• D) the government deficit has decreased.

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Definitions:

Installments

A method of payment where the total cost is divided into smaller, periodic payments over a set period of time.

Small Business Administration

A U.S. government agency that provides support, resources, and loans to small businesses.

Loan

Money borrowed that is expected to be paid back with interest, typically used for larger purchases or to bridge temporary financial gaps.

Cash-flow Method

A financial analysis approach that evaluates an investment's profit or loss by considering the timing and amount of cash inflows and outflows.