Economics · Macroeconomics
Assertion (A): Fiscal policy is relatively more effective when the LM curve is flatter. Reason (R): A flatter LM curve means money demand is highly sensitive to the interest rate, so the crowding-out effect on investment is smaller. Choose the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A is false, R is true
- 2A is true, R is false
- 3Both A and R are true, but R is not the correct explanation of A
- 4Both A and R are true, and R is the correct explanation of A✓
Correct answer
Both A and R are true, and R is the correct explanation of A
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