The Transmission Mechanism

question 14

Multiple Choice

The transmission mechanism

• A)is the process by which fiscal policy affects aggregate demand
• B)works best if money demand is completely interest elastic
• C)fails if none of the components of aggregate demand responds to changes in interest rates
• D)relates to the effects of tax rate changes on the fiscal multiplier
• E)all of the above

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Definitions:

Ion

A charged atom.

Electron

One of the three major parts of an atom. The electron carries a negative charge.

Proton

One of the three principal parts of an atom. The proton has a positive charge.

Ionization Potential

The amount of voltage or potential that must be applied to cause ionization of a gas.