What happens when the investment demand curve is perfectly vertical?

Show Answers

Neither monetary nor fiscal policies have any impactMonetary policy works but fiscal policy does notMonetary policy fails to work, while fiscal policy remains effectiveBoth monetary and fiscal policies produce desired effects

Explanation

When the investment demand curve is vertical, changes in interest rates do not affect investment levels, rendering monetary policy ineffective. However, fiscal policy can still influence aggregate demand, making it effective in this scenario.