Unformatted text preview: rate of interest . Keynesian economists agree that higher or lower rates of interest may have some indirect effect on the marginal efficiency of capital (MEC). This may influence investment behavior to some extent. But the ability of monetary policy to alter the rate of interest significantly is itself a matter of doubt. Keynes’ concept of ’ liquidity trap ’ shows that rate of interest is always positive and it never falls below a certain minimum level. Therefore monetary policy ceases to be of any effect beyond such a point....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.
- Fall '10
- Monetary Policy