If the Quantity of Money Demanded Is Not Affected by Changes

question 98

Multiple Choice

If the quantity of money demanded is not affected by changes in the interest rate,the LM curve is ________ and fiscal policy will be ________.

• A)horizontal;very effective
• B)horizontal;ineffective
• C)vertical;ineffective
• D)vertical;very effective

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Definitions:

Cash Flows

The movement of cash into and out of a business, reflecting operational, investing, and financing activities.

Annuity

A financial instrument that provides a consistent series of payments to a person, often utilized as a source of income for individuals in retirement.

Cash Payback Period

The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment.

Residual Value

The estimated salvage value or end-of-useful life value of an asset after all depreciation has been deducted.