If Spending Is Not Responsive to Changes in the Interest

question 42

Multiple Choice

If spending is not responsive to changes in the interest rate then the

• A) LM curve is vertical.
• B) IS and LM curves are vertical.
• C) IS curve is vertical.
• D) IS curve is vertical and the LM curve is horizontal.

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Definitions:

Interest Rate

The percentage of a loan amount that is applied as interest for the borrower, usually shown as an annual rate of the remaining loan balance.

Present Value

The present worth of a future amount of money or series of cash flows when a particular return rate is applied.

Semiannually

Occurring twice a year, typically every six months, often used in the context of interest or dividend payment schedules or reporting periods.

Annual Interest Rate

The percentage rate charged or paid over a year for borrowing or saving money.