What are the factors that affect the effectiveness of monetary
and fiscal policy?
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Economics
What are the factors that affect the effectiveness of monetaryand fiscal policy?
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The factor which causes monetary policy ineffectiveness occurs in the third stage of the transmission mechanism namely changes in aggregate spending or demand in response to interest rate changes This happens when interest rate changes have negligible effects on planned autonomous spending especially investment spending This condition arises when business companies are so pessimistic about potential prospects of profit making that they are reluctant to pursue any more investment in response to lower interest rates As a result
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