If an Economy Finds Itself in a Liquidity Trap

question 55

Multiple Choice

If an economy finds itself in a liquidity trap:

• A)consumers are trapped by an abundance of liquidity and are spending abundantly.
• B)the economy is trapped by the inability of monetary policy to reduce nominal interest rates further.
• C)money markets are trapped in a state of continuous disequilibrium.
• D)monetary authorities cannot stop nominal interest rates from rising.

---

Definitions:

Major Depressive Disorder

A mental health condition characterized by persistent feelings of sadness, loss of interest, and other emotional and physical symptoms, impacting daily functioning.

Hypomania

A milder form of mania, characterized by elevated mood, increased activity or energy that is not as severe as full mania.

Antisocial Personality Disorder

A mental health disorder characterized by a long-term pattern of disregarding or violating the rights of others without remorse.

Generalized Anxiety Disorder

A chronic psychological disorder characterized by excessive, uncontrollable worry about everyday things, impacting daily functioning.