The Liquidity Trap Is the

question 94

Multiple Choice

The liquidity trap is the

• A) vertical portion of the demand curve for money.
• B) horizontal portion of the demand curve for money.
• C) vertical portion of the supply curve of money.
• D) horizontal portion of the supply curve of money.
• E) vertical portion of the demand curve for investment.

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Definitions:

Indifference Curves

A graphical representation used in economics to show different combinations of two goods that give a consumer equal satisfaction and utility.

Utility Maximizes

The behavior of consumers to obtain the greatest satisfaction from their choices, given their resources.

Substitution Effect

The change in demand for a good or service caused by a change in its price, making consumers choose alternatives.

Budget Constraints

The limitations on the spending behavior of consumers based on their income and the prices of goods and services, determining the possible combinations of goods and services they can afford.