The effect of monetary policy is greatest
A. If the money demand curve is elastic.
B. In the liquidity trap.
C. When investment demand becomes more responsive to changes in the interest rate.
D. If lenders and borrowers have low expectations about the economy.
Answer: C
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The welfare loss of a tariff equals that of a import quota that leads to the same level of imports
Indicate whether the statement is true or false
The U.S. Federal government limits the ability for private firms to harvest timber on much government land. This, it is argued, increases the amount of fuel for wildfires which often burn out of control and cost money and manpower to control
A) This suggests that the policy addressing one positive externality might have created another positive externality. B) This suggests that those who harvest timber are prone to starting wildfires. C) This suggests that the policy addressing timber harvesting created a negative externality. D) This suggests that government policy is destined to fail.