If investment were shown to be insensitive to changes in the interest rate, then we would expect to see
A) a steep IS curve.
B) a flat IS curve.
C) a steep LM curve.
D) a flat LM curve.
E) a vertical LM curve.

Question

Quizplus · Accepted Answer

When investment is insensitive to changes in the interest rate, the IS curve becomes steep because changes in the interest rate have little effect on investment and thus on aggregate demand.

If Investment Were Shown to Be Insensitive to Changes in the Interest