If the central bank determines that aggregate demand is not very sensitive to changes in the interest rate,
A)the monetary policy rule line will shift up.
B)the monetary policy rule line will become steeper.
C)the monetary policy rule line will shift down.
D)there will be movement along the monetary policy rule line.
E)the monetary policy rule line will become flatter.

Question

Quizplus · Accepted Answer

When aggregate demand is not very sensitive to changes in the interest rate, the monetary policy rule line becomes steeper. This indicates that larger changes in the interest rate are required to affect aggregate demand, reflecting a lower sensitivity of demand to interest rate adjustments.

If the Central Bank Determines That Aggregate Demand Is Not