The Liquidity Trap Occurs When

question 38

Multiple Choice

The liquidity trap occurs when:

• A)real interest rates are above the marginal product of capital.
• B)firms have no access to stock markets.
• C)too little money is held in excess reserves.
• D)market interest rates are negative.
• E)the Fed loses control of money supply.

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Definitions:

Legal Bound

Being officially restrained by law or legally obliged to perform or refrain from performing certain actions.

Presumptions

Assumed facts or principles that are taken as true until disproven, often used in legal contexts.

Intent

The determination or resolve to perform a particular act, often playing a significant role in determining the outcome of legal actions.

Statute of Frauds

A legal principle that requires certain types of contracts to be written and signed to be legally enforceable, such as contracts for the sale of real estate.