Economics · Macroeconomics
In macroeconomic analysis, expansionary fiscal policy is highly effective in increasing national output when which of the following structural conditions is met?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The interest rate is entirely volatile and investment exhibits perfect inelasticity
- 2The smaller the induced change in interest rates and smaller the responsiveness of investment to that change
- 3The smaller the induced change in interest rates and larger the responsiveness of investment to that change✓
- 4The larger the induced change in interest rates and smaller the responsiveness of investment to that change
Correct answer
The smaller the induced change in interest rates and larger the responsiveness of investment to that change
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