The Liquidity Trap Refers to the

question 174

Multiple Choice

The liquidity trap refers to the

• A) assumption that the money supply curve is vertical as a result of the Fed's control.
• B) problem that occurs when interest rates reach such high levels that no individuals want to hold their wealth in the form of money.
• C) situation that occurs when an excess supply of money results in people holding more money than they desire.
• D) possibility that interest rates drop so low that people willingly hold all the additions to the money supply,rather than use it to buy bonds.

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Definitions:

U.S. Government

The federal government of the United States, composed of three branches: legislative, executive, and judicial, established to govern the country as outlined in the U.S. Constitution.

Grand Alliance

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Germany

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