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    Question

      If investment is not responding to change in interest rate, then which of the following is true?

    A IS is vertical and monetary policy is ineffective Correct Answer Incorrect Answer
    B IS is vertical and monetary policy is effective Correct Answer Incorrect Answer
    C LM is vertical and monetary policy is ineffective Correct Answer Incorrect Answer
    D LM is vertical and monetary policy is effective Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    If investment is not responding to change in interest rate, then IS is vertical and monetary policy is ineffective in increasing the output level.

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