The Existence of a Liquidity Trap Implies That

question 52

Multiple Choice

The existence of a liquidity trap implies that

• A) a decrease in the interest rate might not increase investment spending.
• B) an increase in the demand for money will be followed by an equal increase in the supply of money.
• C) an increase in the supply of money may not lower interest rates.
• D) a and c

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Definitions:

Vicious Cycle

A sequence of reciprocal cause and effect where a negative situation is perpetuated, often leading to a deterioration of the situation over time.

Social Inequality

The unequal distribution of resources, opportunities, and privileges among individuals in a society, often based on race, gender, or social class.

Racial Stereotypes

Oversimplified or generalized perceptions or beliefs about the characteristics, attributes, and behaviors of members of a particular racial group.

Cultural Markers

Symbols, activities, goods, or practices that identify and distinguish cultural groups or categories.