An increase in the sensitivity of private spending (consumption, investment, and net exports) to changes in the interest rate ________ the government purchases multiplier
A) may increase or may decrease B) will not change
C) will increase D) will decrease
D
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As shown by the IS-LM model, there are two reasons that the Fed can lose control of the economy. One of these reasons is
A) federal funds rate can never reach zero percent. B) zero federal funds rate is not sustainable. C) household and business borrowers do not base their decision to borrow on interest rates. D) that the zero federal funds rate achieved by the Fed is irrelevant to household and business borrowers.
Banks have a maturity mismatch since
A) they borrow long term, but lend short term. B) they borrow short term, but lend long term. C) some of their loans are short term while others are long term. D) some of their borrowings are short term while others are long term.