If We Were in a Liquidity Trap

question 35

Multiple Choice

If we were in a liquidity trap,

• A)investment would be totally interest insensitive
• B) fiscal expansion would be unlikely to drive interest rates up
• C) monetary policy would be more powerful than fiscal policy
• D)an increase in government spending would be totally offset by a decrease in private investment
• E)crowding out would be made worse by the inability of monetary policy to accommodate fiscal policy

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