Personal consumption spending is the most sensitive component of aggregate demand to monetary policy

What are three reasons that the interest-rate parity condition may not always hold?

What will be an ideal response?

The new classical model implies that a shift to a more expansionary fiscal policy (the substitution of debt financing for taxes) will

a. stimulate aggregate demand and employment. b. retard aggregate demand and employment. c. increase the real rate of interest. d. exert little or no impact on the real interest rate, aggregate demand, and employment.