https://web.archive.org/web/19991018220901/http:/www.abc.net.au/money/vault/extr

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https://web.archive.org/web/19991018220901/http:/www.abc.net.au/money/vault/extras/extra5.htm
1b) Friedman states: “However, in the Japanese experiments of the last five or seven years, fiscal stimulus has been accompanied by a restrictive monetary policy rather than an expansive monetary policy and the result has been that you’ve had continued recession or depression”. But Japan’s nominal interest rate was very low (“liquidity trap”), how can the money supply be so tight? What does Friedman mean here? Explain. [Maximum 4 reasonably concise sentences are allowed in your answer
Please type the answer here , not hand written thank u . https://web.archive.org/web/19991018220901/http:/www.abc.net.au/money/vault/extras/extra5.htm
1b) Friedman states: “However, in the Japanese experiments of the last five or seven years, fiscal stimulus has been accompanied by a restrictive monetary policy rather than an expansive monetary policy and the result has been that you’ve had continued recession or depression”. But Japan’s nominal interest rate was very low (“liquidity trap”), how can the money supply be so tight? What does Friedman mean here? Explain. [Maximum 4 reasonably concise sentences are allowed in your answer
Please type the answer here , not hand written thank u .
1b) Friedman states: “However, in the Japanese experiments of the last five or seven years, fiscal stimulus has been accompanied by a restrictive monetary policy rather than an expansive monetary policy and the result has been that you’ve had continued recession or depression”. But Japan’s nominal interest rate was very low (“liquidity trap”), how can the money supply be so tight? What does Friedman mean here? Explain. [Maximum 4 reasonably concise sentences are allowed in your answer 1b) Friedman states: “However, in the Japanese experiments of the last five or seven years, fiscal stimulus has been accompanied by a restrictive monetary policy rather than an expansive monetary policy and the result has been that you’ve had continued recession or depression”. But Japan’s nominal interest rate was very low (“liquidity trap”), how can the money supply be so tight? What does Friedman mean here? Explain. [Maximum 4 reasonably concise sentences are allowed in your answer
Please type the answer here , not hand written thank u .

Explanation / Answer

Friedman wants to bring attention that the fiscal policy and monetary policy in Japan are not working in the same direction. Hence, the economy cannot recover from the recession. Though, he does not consider the liquidity trap scenario where a further increase in money supply is not decreasing the interest rate it is not attracting the investment. Hence, the monetary policy is ineffective and it is the fiscal policy that can bring change in the economy of Japan.

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