Monetary Policy Is Less Effective Than It Was in the Past

question 282

Multiple Choice

Monetary policy is less effective than it was in the past because

• A) investment has become less sensitive to interest rate changes.
• B) the substitution effect of an interest rate change on consumption has increased.
• C) the income effect of an interest rate change on consumption has increased.
• D) the government deficit has decreased.

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Definitions:

Peanuts

Informally, a very small or insignificant amount of money; literally, a legume crop grown mainly for its edible seeds.

Raisins

Dried grapes often used as a snack or cooking and baking ingredient.

Central Office

A telecommunications term referring to a facility where customers' calls are switched by the local central office of a telecommunications provider.

Recordkeeping

The systematic process of maintaining and organizing records or documents relevant to a business, institution, or individual.