When a Liquidity Trap Situation Exists,the Most Appropriate Policy to Increase

question 9

Multiple Choice

When a liquidity trap situation exists,the most appropriate policy to increase output would be

• A)a central bank sale of bonds.
• B)an increase in government spending.
• C)a central bank purchase of bonds.
• D)none of the above

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Definitions:

Tax Revenue

The income that is gained by governments through taxation, which is then used to fund public services and infrastructure.

Medicare

A federal health insurance program in the United States primarily for people aged 65 and older, along with certain younger people with disabilities.

Excise Taxes

Taxes paid when purchases are made on a specific good, such as gasoline or tobacco, often included in the price of the product.

Tax Burden

The measure of the total amount of taxes that individuals, businesses, or other entities must pay.