A Liquidity Trap Refers to a Situation in Which

question 237

Multiple Choice

A liquidity trap refers to a situation in which:

• A)taking away liquidity from the banks has a major positive effect on lending.
• B)adding liquidity to banks has major positive effects on lending.
• C)adding liquidity to banks has little or no positive effects on lending.
• D)taking away liquidity to banks has a major negative effect on lending.

---

Definitions:

Currency

The system of money in general use in a particular country.

Translation Gains

Financial gains resulting from converting the financial statements of a foreign subsidiary into the parent company's reporting currency.

Realized

Refers to profits or losses that have been made official by a transaction or event, distinguishing them from unrealized or paper profits or losses.

Taxed

The imposition of a financial charge or other levy upon a taxpayer by a governing state or the functional equivalent of a state.