[amp_mcq option1=”Monetary and fiscal policies are ineffective” option2=”Both monetary and fiscal policies are effective” option3=”Monetary policy is effective but fiscal policy is ineffective” option4=”Monetary policy is ineffective but fiscal policy is effective” correct=”option1″]<\/p>\n
The correct answer is: A. Monetary and fiscal policies are ineffective.<\/p>\n
A vertical investment demand curve shows that businesses are not willing to invest any more money, regardless of the interest rate. This is because businesses are confident that they will be able to sell their products and make a profit, regardless of the cost of borrowing money. In this situation, monetary policy, which is the use of interest rates to control the economy, is ineffective because businesses are not willing to borrow money, even at low interest rates. Fiscal policy, which is the use of government spending and taxation to control the economy, is also ineffective because businesses are not willing to invest any more money, regardless of the level of government spending or taxation.<\/p>\n
Option B is incorrect because both monetary and fiscal policies are ineffective when the investment demand curve is vertical. Option C is incorrect because monetary policy is effective but fiscal policy is ineffective when the investment demand curve is vertical. Option D is incorrect because monetary policy is ineffective but fiscal policy is effective when the investment demand curve is vertical.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Monetary and fiscal policies are ineffective” option2=”Both monetary and fiscal policies are effective” option3=”Monetary policy is effective but fiscal policy is ineffective” option4=”Monetary policy is ineffective but fiscal policy is effective” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-52959","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n