For efficiency of fiscal and monetary policies (in the sense of influencing outp

ID: 1216385 • Letter: F

Question

For efficiency of fiscal and monetary policies (in the sense of influencing output) in the IS-LM model it holds that:

a) Efficiency of fiscal policy falls with increasing marginal propensity to consume.

b) Efficiency of monetary policy increases with falling tax rate.

c) Efficiency of fiscal policy falls with falling sensitivity of investment to the interest rate.

d) Efficiency of monetary policy increases with increasing sensitivity of the money demand to output.

e) Efficiency of fiscal policy increases with fall of sensitivity of the money demand to the interest rate.

C and D both of therm are correct.

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