An economy is facing lower incomes and higher unemployment. To encourage economic activity, the central bank chooses to lower the rate of interest. Under what circumstances would this policy be most likely to work?
- Awhen spending by consumers on goods and services is income elastic
- Bwhen spending by firms on capital goods is interest rate elastic
- Cwhen the leakage on additional national income is high
- Dwhen the overseas demand for exports is price inelastic