How did this limit potential for monetary policy to help all

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Q. Effectiveness of monetary policy depends on how easy it is for changes in money supply to change interest rates. By changing interest rates, monetary policy affects investment spending and aggregate demand curve. Economies of Albernia and Brittania have very different money demand curves, as shown in accompanying diagram. In which economy will changes in money supply be a more effective policy tool? Why? During Great Depression, businesspeople in United States were very pessimistic about future of economic growth and reluctant to increase investment spending even when interest rates fell. How did this limit potential for monetary policy to help alleviate Depression?

Reference no: EM1369237

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