The greater will be the effectiveness of fiscal policy

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Reference no: EM13795878

True or false?

1. The greater the elasticity of the LM curve, the greater will be the effectiveness of fiscal policy (in terms of increasing income).

2. The more interest elastic the investment demand function, the more effective monetary policy will be.

3. The more interest elastic the investment demand function, the stronger will be the crowding out effect associated with a pure fiscal policy measure.

4. For equilibrium in the goods/commodity market (or, real sector), the higher the rate of interest, the lower the level of income must be.

5. Given a two sector model, at any point to the right of the IS curve, saving must exceed investment.

Reference no: EM13795878

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