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:

Norms

Socially accepted rules of behavior that dictate the expected conduct of individuals within a group or society.

Scarcity

A fundamental economic problem of having seemingly limitless human wants in a world of limited resources, which leads to the necessity of making choices on how to allocate resources efficiently.

Rewarded

Pertains to receiving a benefit or compensation in return for an action or service.

George Homans

An American sociologist known for his work in developing social exchange theory, explaining social behavior in terms of costs, benefits, and expectations of rewards.