In the Recent fiNancial and Economic Crises, the Economy Fell

question 277

Multiple Choice

In the recent financial and economic crises, the economy fell into a so-called liquidity trap, which means that

• A) banks did not have enough reserves to continue lending to firms.
• B) the Fed injected reserves into the banking system, but the interest rates remained high.
• C) firms did not want to borrow from banks because they had little need for extra liquidity.
• D) banks held on to excess reserves and people chose to pay off loans rather than spend.

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Definitions:

Monthly

Pertaining to or calculated for a period of one month.

Subsidiary Ledger

A secondary ledger containing detailed information to support accounts listed in the general ledger, such as accounts receivable or payable details.

Accounts Receivable

Financial accounting of money owed to a business by its clients or customers for goods or services provided on credit.