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Tanuj Rana posted an Question
September 02, 2020 • 14:19 pm 5 points
  • UGC NET
  • Economics

Monetary policy is most effective whe investment spending is: a. interest elastic and demand for money i also interest elastic b. interest inelastic and demand

Monetary policy is most effective whe investment spending is: A. Interest elastic and demand for money i also interest elastic B. Interest inelastic and demand for mon is also interest inelastic C. Interest inelastic and demand for mc iey is interest elastic D. Interest elastic and the demand for money is interest inelasticc

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    Nidhi taparia

    @Tanuj Let's discuss it. Tell me why you think D is right, I've already given most of my explanation.

  • comment-profile-img>
    Nidhi taparia

    Interest elastic implies when interest will change, investment and demand for money will also change. Interest inelastic means these will not change much even when interest changes.

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    Nidhi taparia best-answer

    The answer should be (1). Monetary Policy basically means changing the supply of money to bring about a change in overall economy which includes investment. So if investment spending and demand for money are interest elastic, that means when monetary policy is changed, interest rate is changed, and this will bring about a change in investment. Showing that monetary policy is effective.

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    i think D is right

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