If money demand is extremely sensitive to changes in the interest rate, the money demand curve becomes almost horizontal. If the Fed expands the money supply under these circumstances, then the interest rate will
A) fall substantially and investment and consumer spending will fall substantially.
B) rise substantially and investment and consumer spending will rise substantially.
C) fall substantially and investment and consumer spending will change very little.
D) change very little and investment and consumer spending will change very little.
Answer: D
You might also like to view...
If the marginal social cost of a television exceeds the marginal social benefit of a television, it would increase society's total surplus to decrease production of televisions
Indicate whether the statement is true or false
Refer to the information provided in Figure 23.1 below to answer the question(s) that follow.
Figure 23.1Refer to Figure 23.1. This household consumes $2,000 at an income level of
A. $3,000. B. $2,275. C. $2,000. D. $1,840.