An economy experiences falling incomes and rising unemployment. The central bank decides to reduce the rate of interest to stimulate economic activity. When would such a policy be most likely to succeed?
A.
when spending by consumers on goods and services is income elastic
B.
when spending by firms on capital goods is interest rate elastic
C.
when the leakage on additional national income is high
D.
when the overseas demand for exports is price inelastic
Exam No：9708_w24_qp_33 Year：2024 Question No：23
Answer:
B
Knowledge points:
5.3.1 definition of monetary policy
5.3.2 tools of monetary policy: interest rates, money supply and credit regulations
Solution:
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