Which of These Statements Is the Most Accurate Description of a Liquidity

question 22

Multiple Choice

Which of these statements is the most accurate description of a liquidity trap?

• A)Borrowers are willing to borrow, and expansionary policy is used to stimulate the economy as needed.
• B)Lenders are willing to lend, but high interest rates keep borrowing slightly lower than needed.
• C)Borrowers are unwilling to borrow, and lenders are unwilling to lend due to pessimism about the future.
• D)Lenders are willing to lend, but borrowers borrow too much due to increased optimism about the future.

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