Monetary policy will not be effective if interest rates
A)Change quickly.
B)Respond to a change in the money supply,and investment spending responds to a change in the interest rate.
C)Do not respond to changes in the money supply,and investment spending does not respond to changes in the interest rate.
D)Change slowly.

Question

Quizplus · Accepted Answer

If interest rates do not respond to changes in the money supply, and investment spending does not respond to changes in the interest rate, then monetary policy will not be effective as the intended effect of monetary policy is to influence investment and spending behavior through changes in interest rates. If interest rates change quickly, monetary policy may not have time to take effect, but if they change slowly, monetary policy may still be effective as there is time for the policy to work its way through the economy.

Monetary Policy Will Not Be Effective If Interest Rates