If the investment demand curve is vertical ?
Correct answer: C. monetary policy is ineffective but fiscal policy is effective
- A. both monetary and fiscal policy are ineffective
- B. monetary policy is effective but fiscal policy is ineffective
- C. monetary policy is ineffective but fiscal policy is effective
- D. both monetary and fiscal policy are effective
Explanation
A vertical investment-demand curve means investment does not respond to interest-rate changes, so monetary policy has little effect through investment. Fiscal expansion can still raise aggregate demand and output, making fiscal policy effective.
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