If Desired Investment Spending Is Relatively Sensitive to Changes in Interest

question 31

Multiple Choice

If desired investment spending is relatively sensitive to changes in interest rates,then monetary policy could be very useful because it would

• A)be very effective in reducing expenditure during inflationary periods and very effective in expanding expenditure during recessionary periods.
• B)be very effective in reducing expenditure during inflationary periods and ineffective in expanding expenditure during recessionary periods.
• C)be very ineffective in reducing expenditure during inflationary periods and very effective in expanding expenditure during recessionary periods.
• D)be very ineffective in reducing expenditure during inflationary periods and very ineffective in expanding expenditure during recessionary periods.
• E)be somewhat effective in reducing expenditure during inflationary periods and very ineffective in expanding expenditure during recessionary periods.

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Definitions:

Dollar Diplomacy

A foreign policy initiative under President William Howard Taft that promoted the spread of American influence through loans and economic investments from American banks.

Banana Plantations

Large-scale agricultural operations focused on the cultivation of bananas, notable in Central and South America for their historical ties to colonialism and labor exploitation.

Military Intervention

The act of a nation or group of nations using military force in another country to influence its affairs.

Liberal Internationalism

Woodrow Wilson’s foreign policy theory, which rested on the idea that economic and political freedom went hand in hand, and encouraged American intervention abroad in order to secure these freedoms globally.