During a liquidity trap: A) nominal interest rates will rise regardless of what

Question

During a liquidity trap:

A) nominal interest rates will rise regardless of what policy the Federal Reserve pursues.

B) the money market is in disequilibrium.

C) monetary policy is ineffective, since nominal interest rates cannot fall below zero.

D) the only tool that the Federal Reserve finds effective is expansionary monetary policy.

During a liquidity trap:

A) nominal interest rates will rise regardless of what policy the Federal Reserve pursues.

B) the money market is in disequilibrium.

C) monetary policy is ineffective, since nominal interest rates cannot fall below zero.

D) the only tool that the Federal Reserve finds effective is expansionary monetary policy.

Explanation / Answer

ANSWER:

The correct answer is c (definition of liquidity trap) as in liquidity trap monetary becomes effective due to low interest rates and higher saving rates.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.