Monetary Policy Loses Its Effectiveness in All of the Following

question 49

Multiple Choice

Monetary policy loses its effectiveness in all of the following situations EXCEPT

• A)when the IS curve is vertical.
• B)when the LM curve is nearly horizontal.
• C)when interest rate controlled by the Fed reaches zero.
• D)when the IS curve is horizontal.

---

Definitions:

Revealed Preferences

The theory that consumers' preferences can be determined by their purchasing habits and behavior rather than through their expressed desires or responses to surveys.

Preferences

The subjective tastes or desires of individuals or entities, which determine their choices among various options.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, contrasting with normal goods.

Price Increase

A rise in the cost of goods or services.