If Desired Investment Spending Is Relatively Sensitive to Changes in Interest

question 51

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

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Definitions:

Social Structure

The organized pattern of social relationships and social institutions that together constitute society, guiding and constraining individual behaviors.

Rational Choice Theory

An economic principle that assumes individuals always make prudent and logical decisions that provide them with the highest amount of personal utility.

Micro-to-Macro

An approach or perspective in sociology that starts with the study of individuals or small groups (micro-level) and attempts to understand larger societal structures and processes (macro-level) based on these smaller interactions.

James Coleman

An influential American sociologist best known for his work in education, public policy, and social theory, including the development of the concept of social capital.